<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PACER INTERNATIONAL, INC.
and the Guarantors identified in footnote (1) below
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 4731 62-0935669
<S> <C> <C>
(State of or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification No.)
of incorporation
or organization)
</TABLE>
1340 Treat Boulevard, Suite 200
Walnut Creek, California 94596
(925) 979-4440
(Address, including zip code, and telephone number,including area code, of
registrant's principal executive offices)
----------------
Donald C. Orris
Chairman, President and Chief Executive Officer
1675 Larimer Street, Suite 626
Denver, Colorado 80202
(303) 623-5310
----------------
Copies to:
Morton A. Pierce
Douglas L. Getter
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
(212) 259-8000
----------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
- --------------------------------------------------------------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
<PAGE>
- --------
(1) The following domestic direct or indirect wholly owned subsidiaries of
Pacer International, Inc. are Guarantors of the Notes and are Co-Registrants,
each of which is incorporated in the jurisdiction and has the I.R.S. Employer
Identification Number indicated: Pacer Logistics, Inc., a Delaware corporation
(94-3285040); Cross Con Transport, Inc., an Illinois corporation (36-3877617);
Cross Con Terminals, Inc., a Delaware corporation (36-2924526); Pacer
International Rail Services LLC, a Colorado limited liability company(84-
1412110); Pacer International Consulting LLC, a Colorado limited liability
company (94-3298068); Pacer Rail Services LLC, a Colorado limited liability
company (84-1447539); Pacific Motor Transport Company, a California corporation
(94-6001041); Pacer Express, Inc., a California corporation (68-0419260); Pacer
Integrated Logistics, Inc., a Delaware corporation (52-2090059); PLM
Acquisition Corporation, a Delaware corporation (52-2108513); Manufacturers
Consolidation Service, Inc., a Tennessee corporation (62-0790773); Levcon,
Inc., a Tennessee corporation (62-1020808); Manufacturers Consolidation Service
of Canada, Inc., a Delaware corporation (62-1602017); Interstate Consolidation
Service, Inc., a California corporation(92-2756390); Interstate Consolidation,
Inc., a California corporation (95-2851463); Intermodal Container Service,
Inc., a California corporation (95-3608057); and Keystone Terminals Acquisition
Corp., a Delaware corporation (52-2159704).
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be to be offering price offering registration
registered registered per Note price(1) fee
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 3/4% Series B Senior
Subordinated Notes due
2007.................. $150,000,000 100% $150,000,000 $41,700
- ------------------------------------------------------------------------------
Guarantee of 11 3/4%
Series B Senior
Subordinated Notes due
2007.................. $150,000,000 (2) (2) (2)
- ------------------------------------------------------------------------------
Total.................. $150,000,000 100% $150,000,000 $41,700
- ------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2).
(2) No additional consideration for the guarantees of the 11 3/4% Series B
Senior Subordinated Notes due 2007 will be furnished. Pursuant to Rule
457(n), no separate fee is payable with respect to such guarantees.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective time until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 12, 1999
PROSPECTUS
[LOGO]
PACER INTERNATIONAL, INC.
Offer to Exchange
11 3/4% Series B Senior Subordinated Notes due 2007
which have been registered under the Securities Act
for any and all outstanding
11 3/4% Senior Subordinated Notes due 2007
$150,000,000 aggregate principal amount outstanding
----------------
Material Terms of the Exchange Offer
----------------
. The exchange of notes should not be
. Expires 5:00 p.m., New York City a taxable exchange for U.S. federal
time, on , 1999, unless income tax purposes
extended
. We will not receive any proceeds
. We will exchange your validity from the exchange offer
tendered unregistered notes for an
equal principal amount of
registered notes with
substantially identical terms
. The terms of the notes to be issued
are substantially identical to the
outstanding notes, except for
certain transfer restrictions and
registration rights relating to the
outstanding notes
. Not subject to any condition other
than that the exchange offer not
violate applicable law or any
applicable interpretation of the
Staff of the Securities and
Exchange Commission and certain
other customary conditions
. You may tender outstanding notes
only in denominations of $1,000 and
multiples of $1,000
. Affiliates of our company may not
. You may withdraw your tender of participate in the exchange offer
outstanding notes at any time
prior to the expiration of the
exchange offer
Please refer to "Risk Factors" beginning on page 14 of this document
for certain important information.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes to be issued in the
exchange offer or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
----------------
Prospectus dated , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................. 1
Risk Factors........................ 14
The Exchange Offer.................. 21
Use of Proceeds..................... 33
Unaudited Pro Forma Consolidated
Financial Information.............. 34
Selected Historical and Pro Forma
Consolidated Financial
Information........................ 48
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 54
Business............................ 70
Management.......................... 86
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Agreements.................................................... 91
Stock Ownership of Certain Beneficial Owners and Management........... 96
Our Capital Stock..................................................... 98
Description of Our Credit Agreement................................... 100
Description of Notes.................................................. 103
Book-Entry; Delivery and Form......................................... 139
Material Federal Income Tax Considerations............................ 141
Plan of Distribution.................................................. 142
Legal Matters......................................................... 142
Change in Accountant.................................................. 142
Experts............................................................... 143
Index to Financial Statements......................................... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes the specific terms of the notes we are offering, as well as
information regarding our business, certain recent transactions entered into by
us and detailed financial data. In this prospectus, unless otherwise noted, the
words "company," "issuer," "we," "us," "our" and "ours" refer to Pacer
International, Inc. and our subsidiaries. However, the words "Pacer
International" and "Pacer Logistics" refer to Pacer International, Inc. and
Pacer Logistics, Inc., respectively, as separate, individual entities. We
encourage you to read this prospectus in its entirety.
The Exchange Offer
On May 28, 1999, we completed the private offering of $150,000,000 principal
amount of our 11 3/4% Senior Subordinated Notes due 2007. These notes were sold
to certain initial purchasers identified in this prospectus. The notes are
guaranteed by substantially all of our subsidiaries.
We and our subsidiaries which are guarantors of the notes entered into a
registration rights agreement with the initial purchasers in the private
offering in which we agreed, among other things, to deliver to you this
prospectus and to complete the exchange offer on or prior to December 24, 1999.
As a holder of such outstanding notes, you are entitled to exchange in the
exchange offer your unregistered notes for a new series of notes which we have
registered under the Securities Act and have substantially identical terms.
We believe that the notes issued in the exchange offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act, subject to certain conditions. Following the exchange
offer, any notes held by you that are not exchanged in the exchange offer will
continue to be subject to the existing restrictions on transfer on the notes
and, except in certain circumstances, we will have no further obligation to you
to provide for registration under the Securities Act of transfers of
outstanding notes held by you. You should read the discussion under the
headings "Summary of the Exchange Offer" and "The Exchange Offer" for further
information regarding the exchange offer and the resale of notes.
Summary of The Exchange Offer
Securities Offered.......... $150,000,000 aggregate principal amount of 11
3/4% Series B Senior Subordinated Notes due 2007
which we have registered under the Securities
Act.
Issuer ..................... Pacer International, Inc.
Registration Rights
Agreement................... You are entitled to exchange your unregistered
notes for registered notes with substantially
identical terms. The exchange offer is intended
to satisfy this right. After the exchange offer
is completed, you will no longer be entitled to
any exchange or registration rights with respect
to your notes. Under certain circumstances,
holders of outstanding notes may require us to
file a shelf registration statement under the
Securities Act.
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of exchange notes of Pacer International
for each $1,000 principal amount of outstanding
11 3/4% Senior Subordinated Notes due 2007 which
we issued on May 28, 1999 in a private offering.
In order to be
1
<PAGE>
exchanged, an outstanding note must be properly
tendered and accepted. All outstanding notes that
are validly tendered and not validly withdrawn
will be exchanged.
As of this date, there is $150,000,000 principal
amount of notes outstanding.
We will issue the exchange notes on or promptly
after the expiration of the exchange offer.
Resale...................... We believe that the exchange notes issued in the
exchange offer may be offered for resale, resold
and otherwise transferred by you without
compliance with the registration and prospectus
delivery provisions of the Securities Act
provided that:
. the exchange notes issued in the exchange offer
are being acquired in the ordinary course of
your business;
. you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate,
in the distribution of the notes issued to you
in the exchange offer; and
. you are not an "affiliate" of our company.
If our belief is inaccurate and you transfer any
note issued to you in the exchange offer without
delivering a prospectus meeting the requirements
of the Securities Act or without an exemption
from registration of your notes from such
requirements, you may incur liability under the
Securities Act. We do not assume, or indemnify
you against, such liability.
Each broker-dealer that is issued exchange notes
in the exchange offer for its own account in
exchange for notes which were acquired by such
broker-dealer as a result of market-making or
other trading activities, must acknowledge that
it will deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resale of the exchange notes issued in
the exchange offer. A broker-dealer may use this
prospectus for an offer to resell, resale or
other retransfer of the exchange notes issued to
it in the exchange offer.
The exchange offer is not being made to, nor will
we accept surrenders for exchange from, the
following:
. holders of notes in any jurisdiction in which
this exchange offer or the acceptance thereof
would not be in compliance with the applicable
securities or "blue sky" laws of such
jurisdiction; and
. holders of notes who are affiliates of our
company.
Expiration Date............. The exchange offer~ will expire at 5:00 p.m., New
York City time, on , 1999, unless extended,
in which case the term "expiration date" shall
mean the latest date and time to which we extend
the exchange offer.
2
<PAGE>
Conditions to the Exchange
Offer....................... The exchange offer is subject to certain
customary conditions, which may be waived by us.
The exchange offer is not conditioned upon any
minimum principal amount of notes being tendered.
Procedures for Tendering
Old Notes................... If you wish to tender your notes for exchange
pursuant to the exchange offer you must transmit
to the Wilmington Trust Company, as exchange
agent, on or before the expiration date:
either
. a properly completed and duly executed letter
of transmittal, which accompanies this
prospectus, or a facsimile of the letter of
transmittal, together with your notes and any
other required documentation, to the exchange
agent at the address set forth in this
prospectus under the heading "The Exchange
Offer--Exchange Agent," and on the front cover
of the letter of transmittal; or
. a computer generated message transmitted by
means of The Depository Trust Company's
Automated Tender Offer Program system and
received by the exchange agent and forming a
part of a confirmation of book-entry transfer
in which you acknowledge and agree to be bound
by the terms of the letter of transmittal.
If either of these procedures cannot be satisfied
on a timely basis, then you should comply with
the guaranteed delivery procedures described
below.
By executing the letter of transmittal, each
holder of notes will make certain representations
to us described under "The Exchange Offer--
Procedures for Tendering."
Special Procedures for
Beneficial Owners........... If you are a beneficial owner whose notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your notes in the exchange
offer, you should contact such registered holder
promptly and instruct such registered holder to
tender on your behalf. If you wish to tender on
your own behalf, you must, prior to completing
and executing the letter of transmittal and
delivering your notes, either make appropriate
arrangements to register ownership of the notes
in your name or obtain a properly completed bond
power from the registered holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the expiration date.
3
<PAGE>
Guaranteed Delivery
Procedures.................. If you wish to tender your notes and time will
not permit the documents required by the letter
of transmittal to reach the exchange agent prior
to the expiration date, or the procedure for
book-entry transfer cannot be completed on a
timely basis, you must tender your notes
according to the guaranteed delivery procedures
described in this prospectus under the heading
"The Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Notes and
Delivery of Exchange Subject to the conditions described in "The
Notes....................... Exchange Offer--Conditions to the Exchange
Offer," we will accept for exchange any and all
notes which are validly tendered in the exchange
offer and not withdrawn, prior to 5:00 p.m., New
York City time, on the expiration date.
Withdrawal Rights........... You may withdraw the tender of your notes at any
time prior to 5:00 p.m., New York City time, on
the expiration date, subject to compliance with
the procedures for withdrawal described in this
prospectus under the heading "The Exchange
Offer--Withdrawal of Tenders."
Federal Income Tax
Considerations.............. For a discussion of the material federal income
tax considerations relating to the exchange of
notes for exchange notes, see "Material Federal
Income Tax Considerations."
Exchange Agent.............. Wilmington Trust Company, the trustee under the
indenture governing the notes, is serving as the
exchange agent. The address, telephone number and
facsimile number of the exchange agent are set
forth in this prospectus under the heading "The
Exchange Offer--Exchange Agent."
Consequences of Failure to
Exchange Old Notes.......... If you do not exchange your notes for exchange
notes pursuant to the exchange offer, you will
continue to be subject to the restrictions on
transfer provided in the notes and in the
indenture governing the notes. In general, the
notes may not be offered or sold, unless
registered under the Securities Act, except
pursuant to an exemption from, or in a
transaction not subject to, the Securities Act
and applicable state securities laws. We do not
currently plan to register the notes under the
Securities Act.
Summary of Terms of the Exchange Notes
The exchange offer relates to the exchange of up to $150,000,000 aggregate
principal amount of exchange notes for up to an equal principal amount of
outstanding notes. The form and terms of the exchange notes are the same as the
form and terms of the outstanding notes, except that the exchange notes will be
registered under the Securities Act, and, therefore, the exchange notes will
not be subject to certain transfer restrictions, registration rights and
certain provisions providing for an increase in the interest rate of the
outstanding notes under certain circumstances relating to the registration of
the exchange notes. The exchange notes issued in the exchange offer will
evidence the same debt as the outstanding notes, which they replace, and both
the outstanding notes and the exchange notes are governed by the same
indenture.
4
<PAGE>
$150,000,000 aggregate principal amount of 11
Notes Offered................. 3/4% Series B Senior Subordinated Notes due
2007.
Maturity...................... June 1, 2007.
Interest...................... Interest on the exchange notes will accrue from
the last interest payment date on which
interest was paid on the notes surrendered in
exchange for exchange notes or, if no interest
has been paid on the notes, from May 28, 1999,
the date of original issuance of the notes.
Interest on the exchange notes will be payable
in cash on June 1 and December 1 of each year,
beginning December 1, 1999. The exchange notes
will bear interest at a fixed rate of 11 3/4%
per annum.
Optional Redemption........... We may redeem any of the notes beginning on
June 1, 2003 at an initial redemption price of
105.875% of their principal amount, plus
accrued interest. The redemption price will
decline each year after 2003 and will be 100%
of the principal amount, plus accrued interest,
beginning on June 1, 2005. In addition, we may
redeem up to 35% of the principal amount of the
notes at any time prior to June 1, 2002 at a
redemption price equal to 111.750% of their
principal amount, plus accrued interest, using
the proceeds from certain sales of our capital
stock.
Change of Control............. Upon a change of control, as defined under
"Description of Notes", we will be required to
make an offer to purchase the notes. The
purchase price will equal 101% of the principal
amount of the notes on the date of purchase,
plus accrued interest. We may not have
sufficient funds available at the time of any
change of control to make any required debt
repayment, including repurchases of the notes,
and the terms of our credit facilities may
block any such payments.
In addition, upon a change of control prior to
June 1, 2003, we may redeem the notes, in whole
but not in part, at a redemption price equal to
the principal amount thereof plus an applicable
premium, plus accrued interest.
Ranking....................... The notes will rank behind all of our existing
and future senior debt and secured debt. On a
pro forma basis as of April 2, 1999, the notes
would have been subordinated to approximately
$135.0 million of senior debt, excluding unused
commitments of approximately $100.0 million
under our revolving credit facility.
Certain Covenants............. The terms of the notes restrict our ability and
the ability of our subsidiaries to:
. incur additional indebtedness;
. pay dividends or make distributions in
respect of capital stock;
. repurchase or redeem capital stock;
5
<PAGE>
. make certain investments and other
restricted payments;
. create liens;
. enter into transactions with stockholders
or affiliates;
. sell assets; and
. merge or consolidate with other companies.
The indenture governing the rates provides that
these limitations are subject to a number of
important qualifications and exceptions.
Subsidiary Guarantees......... Substantially all of our subsidiaries guarantee
our obligations under the notes. These
guarantees are subordinated to all senior debt
and secured debt of such subsidiaries.
Form of Exchange Notes........ The exchange notes issued in the exchange offer
will be represented by one or more permanent
global certificates, in fully registered form,
deposited with a custodian for, and registered
in the name of a nominee of, The Depository
Trust Company, as depositary. You will not
receive notes in certificated form unless one
of the events set forth under "Book Entry;
Delivery and Form" occurs. Instead, beneficial
interests in the exchange notes will be shown
on, and transfers of these notes will be
effected through, records maintained in book-
entry form by The Depository Trust Company and
its participants.
Use of Proceeds............... We will not receive any proceeds from the
exchange offer.
About Our Company
Who We Are
We are a leading freight transportation and logistics provider, offering a
broad array of services to facilitate the movement of freight from origin to
destination. We believe, as one of the largest transporters of intermodal
freight in North America, we controlled approximately 23.0% of all domestic
intermodal containers in 1998. We are also the third largest intermodal
marketing company in the United States, as measured by intermodal rail
revenues. Intermodal transportation is the movement of freight via trailer or
container using two or more transportation modes. Intermodal transportation
nearly always includes a rail and truck segment. An intermodal marketing
company arranges intermodal transportation for global, national and regional
retailers and manufacturers. Our pro forma gross revenues and adjusted EBITDA
were $987.4 million and $72.2 million, respectively, for the twelve month
period ended April 2, 1999.
Through our stacktrain business, we are the largest provider of intermodal
rail service in North America that is not affiliated with an individual
railroad company. Stacktrain service is the movement of freight in containers
stacked two high on railcars. Through this business, we provide our customers
with rail capacity, equipment and shipment tracking and control on a nationwide
basis. We operate one of the industry's largest fleets of stacktrain equipment,
including railcars, containers and chassis. Through contracts with major rail
carriers and our access to sophisticated proprietary information systems, we
operate our equipment over a 50,000 mile rail network.
6
<PAGE>
Complementing our stacktrain business, we offer a broad range of additional
transportation services, including trucking, intermodal marketing and logistics
services, to a broad range of shippers such as Sony, Ford Motor Company and
Wal-Mart Stores.
A significant portion of our intermodal trucking, logistics and freight
handling services is provided through a network of agents and independent
contractors. These relationships allow us to control a large fleet of
specialized equipment and provide our customers with a broad range of
transportation services without committing significant capital to the
acquisition and maintenance of an extensive asset base. Our relatively low
capital and working capital requirements and variable cost structure enable us
to generate strong free cash flow in a variety of market conditions.
Growth Strategy
We have developed a strategy designed to increase revenues, cash flow and
profitability while maximizing returns on invested capital. The primary
components of our growth strategy include:
Capitalize on Stacktrain Growth Opportunities
We believe that the stacktrain market, which has grown at a compound annual
rate of approximately 15.0% over the last decade, provides a significant
opportunity for continued growth. We expect our stacktrain business to benefit
from economic and operational efficiencies offered by the stacktrain
technology, improved rail service and our experienced senior management team.
Expand Service Offerings to Capitalize on Strong Logistics Industry Trends
We believe it is important to meet the diverse needs of our customers who
are increasingly looking to outsource their transportation requirements. We
intend to capitalize on the continuing trend of vendor consolidation and
outsourcing by maintaining a broad range of service offerings and introducing
new services to handle our customers' diverse transportation and logistics
requirements.
Increase Sales to Existing Customers
We believe that by offering a broad menu of services, we will be able to
expand our relationships with our existing customers. Our strategy involves a
continued focus on capturing additional freight volume from existing customers
which is currently being shipped by long-haul trucking companies or intermodal
competitors as well as providing logistics services.
Expand Our Customer Base
We believe our national presence, large size and broad scope of services
make us well-positioned to capture an increasing number of customers seeking a
single-source freight transportation and logistics provider. We intend to
expand our customer base by leveraging our operating infrastructure and adding
sales agents and independent contractors. In addition, we believe our
stacktrain business is strategically-positioned to acquire new business from
international shipping companies who were historically reluctant to utilize our
stacktrain services when the business was owned by APL Limited, a direct
competitor of such international shipping companies.
Pursue Strategic Acquisitions
As an additional component of our growth strategy, we intend to continue our
disciplined acquisition program. Due to the fragmented nature of the industry
and the general industry trend toward consolidation, we
7
<PAGE>
believe there is increased pressure on smaller transportation and logistics
companies to consolidate. We intend to seek acquisition candidates with
complementary management and operating philosophies and service capabilities
that we can add to and integrate with our current menu of services.
----------------
Our principal executive offices are located at 1340 Treat Boulevard, Suite
200, Walnut Creek, CA 94596 and our telephone number is (925) 979-4440.
8
<PAGE>
OUR RECAPITALIZATION
In connection with the private offering of the notes, we were recapitalized
through (1) the purchase by entities formed by certain affiliates of Apollo
Management, L.P. and by certain affiliates of Deutsche Bank Securities Inc. and
Credit Suisse First Boston Corporation of shares of our outstanding common
stock from APL Limited and (2) our redemption of certain shares of our common
stock held by APL Limited. Our recapitalization was financed by:
. the private offering of the notes;
. borrowings under our credit agreement;
. the sale and leaseback of certain of our assets; and
. equity investments by certain affiliates of Apollo Management, Deutsche
Bank Securities Inc. and Credit Suisse First Boston Corporation and by
APL Limited.
Immediately following our recapitalization, we formed a transitory
subsidiary which was merged with and into Pacer Logistics, Inc. As a result of
such transaction, Pacer Logistics became a wholly-owned subsidiary of our
company. In connection the Pacer Logistics transaction, certain members of
Pacer Logistics management received shares of a series of Pacer Logistics
preferred stock exchangeable for our common stock. In connection with the Pacer
Logistics transaction, we used cash to refinance the existing debt of Pacer
Logistics, redeem outstanding Pacer Logistics preferred stock and make payments
in connection with certain other Pacer Logistics transactions. The sources of
funds used to complete the Pacer Logistics transaction were the same as those
set forth above.
Apollo Management beneficially owns approximately 89.9% of our outstanding
common stock, APL Limited owns approximately 7.2% of our outstanding common
stock and certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse
First Boston Corporation together beneficially own approximately 2.9% of our
outstanding common stock. The Pacer Logistics exchangeable preferred stock is
exchangeable, under certain circumstances, for a number of shares of our common
stock, currently representing approximately 18.9% of the outstanding Pacer
International common stock as of the date hereof.
Pacer International conducts business under the name Pacer Stacktrain. The
following chart sets forth our structure:
------------- -----------
Affiliates of APL Limited
Apollo
Management
------------- -----------
89.9% \ / 7.2%
\ /
\ /
\ ------------------- /
\ Pacer International /
(Issuer)
-------------------
100%
| ---------------
| Pacer Logistics
| Management
| ---------------
| /
--------------- /
Pacer Logistics /
(Guarantor) _____|
---------------
|
| Pacer Logistics Preferred
| Stock exchangeable for
| Pacer International
| Common Stock
|
|
---------------
Pacer Logistics
Subsidiaries
(Guarantors)
---------------
9
<PAGE>
The net proceeds from the private offering were used to consummate our
recapitalization and to fund the Pacer Logistics transaction. The following
table is intended to show you the sources, including the net proceeds from the
private offering, and uses of funds for our recapitalization and for the Pacer
Logistics transaction:
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C> <C>
Sources of Funds
Senior Credit
Facilities:(1)
Borrowings under the
Revolving Credit
Facility............... $ --
Borrowings under the
Term Loan.............. 135.0
Issuance of Senior
Subordinated Notes....... 150.0
Exchange of Pacer
Logistics common stock
for Pacer Logistics
Exchangeable Preferred
Stock(2)............... 24.3
Rollover of common stock
options from Pacer
Logistics(2)........... 4.3
Rollover of common stock
from APL Limited(2).... 7.5
Proceeds from the
issuance of common
stock(3)............... 96.9
----
Issued, rolled and
exchanged equity......... 133.0
------
Total sources........... $418.0
======
</TABLE>
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C> <C>
Uses of Funds
Purchase and rollover of APL Limited common equity...... $300.0
Purchase and rollover of Pacer Logistics common equity.. 71.9
Purchase of Pacer Logistics preferred stock............. 3.4
Repayment of existing debt.............................. 58.6
Proceeds from sale and leaseback transaction(4)......... (40.0)
Fees and expenses....................................... 24.1
------
Total uses.............................................. $418.0
======
</TABLE>
- --------
(1) The Senior Credit Facilities consist of a seven-year $135.0 million Term
Loan and a five-year $100.0 million Revolving Credit Facility. See
"Description of Our Credit Agreement."
(2) Represents non-cash consideration.
(3) Includes (a) an aggregate $93.9 million cash equity investment by certain
affiliates of Apollo Management and (b) an aggregate $3.0 million cash
equity investment by certain affiliates of Deutsche Bank Securities Inc.
and Credit Suisse First Boston Corporation.
(4) We executed a sale and leaseback transaction for certain railcars purchased
in 1998.
10
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary unaudited pro forma consolidated
financial information and other data for the fiscal year ended December 25,
1998 and the twelve and three month periods ended April 2, 1999. It is
important that you read this information along with the unaudited pro forma
consolidated financial information and the related notes included elsewhere in
this prospectus.
The summary unaudited pro forma consolidated statement of operations data
gives effect to our recapitalization and the Pacer Logistics transaction as if
they had occurred at the beginning of the period presented. The unaudited pro
forma consolidated balance sheet data reflects the financial position of our
business as if our recapitalization and the Pacer Logistics transaction had
occurred on April 2, 1999.
Pacer International's fiscal year ends on the last Friday in December and
its fiscal first quarter consists of the first fourteen weeks of the fiscal
year. As a result, Pacer International's 1998 and 1999 fiscal year end is
December 25 and December 31, respectively, and Pacer International's first
fiscal quarter of 1999 ended on April 2.
Pacer Logistics' fiscal year ends on December 31 and its fiscal first
quarter ends on March 31, and has been presented in the unaudited pro forma
consolidated financial statements without any adjustment for the difference in
fiscal year ends between Pacer International and Pacer Logistics. The pro forma
consolidated financial information reflects our recapitalization and the Pacer
Logistics transaction using the purchase method of accounting for the Pacer
Logistics transaction.
We do not claim or represent that the summary unaudited pro forma
consolidated financial information set forth below is indicative of the results
that would have been reported had our recapitalization and the Pacer Logistics
transaction actually occurred on the dates indicated above, nor is it
indicative of our future results. There can be no assurance that the
assumptions used by management, which they believe are reasonable, in the
preparation of the summary unaudited pro forma consolidated financial
information will prove to be correct. Additionally, pro forma consolidated
operating results for the three months ended April 2, 1999 and for the last
twelve months ended April 2, 1999 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1999.
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
For the For the Three For the Twelve
Fiscal Year Ended Months Ended Months Ended
December 25, 1998 April 2, 1999 April 2, 1999
----------------- ------------- --------------
(in millions, except ratios and statistical
data)
<S> <C> <C> <C>
Statement of Operations Data:
Gross revenues................. $981.6 $253.9 $987.4
Cost of purchased
transportation and services... 780.4 201.0 783.0
Net revenues................... 201.2 52.9 204.4
Direct operating expenses...... 65.3 18.7 65.9
Selling, general and
administrative expenses....... 75.8 19.4 75.9
Income from operations......... 55.0 14.0 57.4
Interest expense............... 30.1 7.5 30.1
Income before extraordinary
loss.......................... 13.3 3.5 14.8
Other Financial Data: (a)
EBITDA (b)..................... $ 64.8 $ 16.5 $ 67.1
EBITDA margin.................. 32.2% 31.2% 32.8%
Adjusted EBITDA (c)............ $ 69.9 $ 17.4 $ 72.2
Adjusted EBITDA margin......... 34.7% 32.9% 35.3%
Depreciation................... $ 6.1 $ 1.6 $ 5.9
Amortization................... 3.7 0.9 3.7
Capital expenditures (d)....... 1.7 0.4 1.7
Cash interest expense (e)...... 28.5 7.1 28.4
Ratio of earnings to fixed
charges(f).................... 1.5x 1.5x 1.5x
Debt to Adjusted EBITDA........ 3.9x
Adjusted EBITDA to cash
interest expense.............. 2.5x 2.5x 2.5x
Balance Sheet Data (at period
end):
Total assets................... $398.2 $398.2
Total debt..................... 285.0 285.0
Exchangeable preferred stock... 24.3 24.3
</TABLE>
- --------
(a) Pro forma EBITDA and pro forma Adjusted EBITDA margins are calculated as a
percentage of net revenues.
(b) EBITDA represents income before income taxes, interest expense,
depreciation and amortization and minority interest (payment-in-kind
dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is
presented because it is commonly used by certain investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flows or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
(c) Adjusted EBITDA represents pro forma EBITDA adjusted as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Twelve Months
December 25, 1998 Ended April 2, 1999 Ended April 2, 1999
----------------- ------------------- -------------------
<S> <C> <C> <C>
Pro forma EBITDA....... $64.8 $16.5 $67.1
Adjustments to pro
forma EBITDA:
Elimination of
allocated corporate
costs, less estimated
stand-alone costs
(1).................. 3.0 0.9 3.0
Elimination of
historical Pacer
Logistics initial
public offering
costs (2)............ 1.5 -- 1.5
Elimination of
historical
Manufacturers
Consolidation
Service, Inc. initial
public offering costs
(3).................. 0.6 -- 0.6
----- ----- -----
Adjusted EBITDA........ $69.9 $17.4 $72.2
===== ===== =====
</TABLE>
12
<PAGE>
- --------
(1) Reflects the elimination of historical corporate overhead costs allocated
to Pacer International by APL Limited, less $2.8 million of estimated
annual costs expected to be incurred by Pacer International to perform
the services as a stand-alone entity. The estimated annual stand-alone
costs consist of salaries and benefits of $1.7 million, outside services
and consulting fees of $0.6 million and additional rent of $0.5 million.
(2) Pacer Logistics incurred $1.5 million of non-recurring costs related to
an expected initial public offering in 1998.
(3) Manufacturers Consolidation Service is a wholly owned subsidiary of Pacer
Logistics. Manufacturers Consolidation Service incurred $0.6 million of
non-recurring costs related to an expected initial public offering prior
to its acquisition by Pacer Logistics in 1998.
(d) In 1998, Pacer International purchased $39.7 million of railroad cars of
which $23.4 million of expenditures were included in the twelve months
ended April 2, 1999. In connection with our recapitalization and the Pacer
Logistics transaction, we completed a sale and leaseback transaction for
these railcars.
Therefore, on a pro forma basis, the capital expenditures related to these
railcars has been eliminated and direct operating expenses has been
increased by $2.5 million and $2.2 million for the year ended December 25,
1998 and the twelve months ended April 2, 1999, respectively, to reflect
the net impact on operating results of the additional lease expense less
the historical depreciation on these railcars.
(e) Cash interest expense represents interest expense less amortization of debt
issuance costs.
(f) For the purposes of the computation, the ratio of earnings to fixed charges
has been calculated by dividing (i) income before income taxes plus fixed
charges by (ii) fixed charges. Fixed charges are defined as interest
expense plus the estimated interest portion of rent expense (assumed to be
one-third of rent expense).
RECENT DEVELOPMENTS
We recently completed the calculation of certain financial information for
our second quarter ended June 25, 1999 for the 1999 fiscal year. For this
period, we reported revenue of $195.0 million and operating income of $11.3
million. For the prior year period, we reported revenue and operating income of
$136.7 million and $8.3 million, respectively.
13
<PAGE>
RISK FACTORS
In evaluating an investment in the notes, you should carefully consider the
following factors in addition to all other information contained in this
prospectus.
Our High Level Of Debt Creates A Risk Of Default
In order to complete our recapitalization and the Pacer Logistics
transaction, we incurred a high level of debt. As of April 2, 1999, on a pro
forma basis giving effect to our recapitalization and the Pacer Logistics
transaction, our long-term debt was approximately $285.0 million, excluding
unused commitments of $100.0 million under our revolving credit facility,
while our total capitalization was $262.3 million. We also have the ability to
incur new debt, subject to limitations in our credit agreement and the
indenture governing the notes.
Our level of indebtedness could have important consequences to you because
it:
. limits our ability to obtain additional financing to fund our growth
strategy, working capital requirements, capital expenditures, debt
service requirements or other needs;
. limits our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds
to make principal payments and fund debt service;
. increases our vulnerability to interest rate fluctuations because most
of our debt may be at variable interest rates;
. limits our ability to compete with others who are not as highly
leveraged; and
. limits our ability to react to changing market conditions, changes in
our industry and economic downturns.
Our ability to pay principal and interest on the notes and to satisfy our
other debt obligations will depend upon our future operating performance. Our
future operating performance may be subject to factors beyond our control
which will affect our ability to make these payments. We cannot assure you
that our business will generate cash flow, or that we will be able to
refinance or obtain additional financing, sufficient to satisfy our debt
service requirements.
The Notes And The Guarantees Are Subordinate To Senior Indebtedness
The notes and the guarantees are subordinate to all of our and the
guarantors' senior indebtedness including, without limitation, our credit
facilities. At April 2, 1999, on a pro forma basis giving effect to our
recapitalization and the Pacer Logistics transaction, we had approximately
$135.0 million of senior indebtedness, excluding unused commitments of $100.0
million under our revolving credit facility. We also may incur additional
senior indebtedness consistent with the terms of our debt agreements. In the
event of our bankruptcy, liquidation or dissolution, our assets would be
available to pay obligations on the notes only after all payments had been
made on our senior indebtedness. We cannot assure you that sufficient assets
would remain to make any payments on the notes. In addition, certain events of
default under our senior indebtedness would prohibit us from making any
payments on the notes, including interest payments.
Our Debt Agreements Contain Operating And Financial Restrictions Which May
Restrict Our Business And Financing Activities
The operating and financial restrictions and covenants in our credit
agreement and the indenture governing the notes and any future financing
agreements may adversely affect our ability to finance future operations or
capital needs or to engage in other business activities. In addition, our debt
agreements may restrict our ability to:
. declare dividends, redeem or repurchase capital stock;
. prepay, redeem or purchase debt, including the notes;
14
<PAGE>
. incur liens and engage in sale and leaseback transactions;
. make loans and investments;
. incur additional indebtedness;
. amend or otherwise change debt and other material agreements;
. make capital expenditures;
. engage in mergers, acquisitions and asset sales;
. enter into transactions with affiliates; and
. change our primary business.
A breach of any of the restrictions or covenants in our debt agreements
could cause a default under our credit agreement or the indenture governing the
notes. A significant portion of our indebtedness then may become immediately
due and payable. We are not certain whether we would have, or be able to
obtain, sufficient funds to make these accelerated payments, including payments
on the notes.
The Interests Of Apollo Management, L.P. May Conflict With Your Interests
Certain affiliates of Apollo Management, L.P. beneficially own approximately
89.9% of our outstanding common stock and voting power. As a result of its
voting power and a stockholders agreement among the holders of our common
stock, Apollo Management is in a position to elect a majority of our board of
directors and control all matters affecting our company, including any
determination with respect to:
. the direction and policies of our company;
. the acquisition and disposition of assets;
. future issuances of common and preferred stock or other securities;
. future incurrence of debt; and
. any dividends on our common or preferred stock.
Some decisions concerning the operations or financial structure of our
company may present conflicts of interest between Apollo Management and the
holders of the notes. If we encounter financial difficulties, or we are unable
to pay our debts as they mature, the interests of our equity holders might
conflict with those of the holders of the notes. In addition, our equity
holders may have an interest in pursuing acquisitions, divestitures, financings
or other transactions, that, in their judgment, could enhance their equity
investment, even though such transactions might involve risks to the holders of
the notes.
We Rely On Key Personnel Who Have Unique Experience and Expertise
Our operations and prospects depend in large part on the performance of our
senior management team. We cannot be sure that we would be able to find
qualified replacements for any of these individuals if their services were no
longer available. The loss of the services of one or more members of our senior
management team, particularly Donald C. Orris, our chairman, president and
chief executive officer, could have a material adverse effect on our business,
financial condition and results of operations. Because Mr. Orris has unique
experience with our company and within the transportation industry, it would be
difficult to replace him without adversely affecting our business operations.
We are currently in the process of obtaining key person life insurance on
Mr. Orris.
We Are Dependent Upon The Availability Of Equipment And Services To Operate Our
Business
We are dependent upon transportation equipment and services such as chassis,
containers and rail service provided by independent third parties. There have
historically been periods of equipment shortages in the transportation
industry, particularly in a strong economy. If we received insufficient
transportation equipment or services from these third parties to meet our
customers' needs, our business, results of operations and financial position
could be materially adversely affected.
15
<PAGE>
Our Reliance On Agents And Independent Contractors Could Adversely Affect Our
Operations And Profitability
We rely on the services of agents and independent contractors in certain of
our transportation services. The employment of agents and the use of
independent contractors may cause certain disadvantages such as reduced
operating control and potential difficulties attracting such agents or
independent contractors during times of constrained capacity. Contracts with
agents and independent contractors are, in most cases, terminable upon short
notice by either party. We believe our relationships with our agents and
independent contractors are good. However, there can be no assurance that we
will continue to be successful in retaining our agents and independent
contractors or that agents or independent contractors who terminate their
contracts with us can be replaced by equally qualified persons. Furthermore, if
an agent terminates its relationship with us, some customers and independent
contractors with whom such agent has a direct relationship might terminate
their relationship with us. In addition, from time to time, tax and other
regulatory authorities and certain others have sought to assert that
independent contractors in the trucking industry are employees, rather than
independent contractors. No such claim has been successfully made with respect
to our independent contractors, and management is confident that our
independent contractors are not employees under existing interpretations of
federal and state tax or other laws. There can be no assurance, however, that
tax authorities or others will not successfully challenge this position, or
that such interpretations will not change, or that tax laws will not change. If
our independent contractors were determined to be employees, such determination
could materially increase our exposure under a variety of federal and state
tax, worker's compensation, unemployment benefits, labor and employment and
tort laws, as well as our potential liability for employee benefits.
There Are Risks Associated With Our Acquisitions Strategy
Identifying, acquiring and integrating businesses requires substantial
management, financial and other resources and may pose risks with respect to
customer service and market share. Further, acquisitions involve a number of
special risks, including failure of the acquired business to achieve expected
results, diversion of management's attention, failure to retain key personnel
of the acquired business and risks associated with unanticipated events or
liabilities, some or all of which could have a material adverse effect on our
business, financial condition and results of operations. We have acquired
certain businesses in the past and may consider acquiring businesses in the
future that provide complementary services to those we currently provide. There
can be no assurance that the businesses which we have acquired in the past and
may acquire in the future can be successfully integrated. While we believe that
we have sufficient financial and management resources to successfully conduct
our acquisition activities, there can be no assurance in this regard or that we
will not experience difficulties with customers, personnel or others. In
addition, although we believe that our acquisitions will enhance our
competitive position, business and financial prospects, there can be no
assurance that such benefits will be realized or that any combination will be
successful.
Integration of Pacer International and Pacer Logistics May Not Succeed
The integration of Pacer International and Pacer Logistics will require
substantial management, financial and other resources which may otherwise be
devoted to improving sales, customer service and productivity. A failure to
implement a new management structure without difficulty or at all, could have a
material adverse effect on our operations. In addition, the cost savings,
revenue enhancements and margin improvements anticipated as a result of our
recapitalization and the Pacer Logistics transaction may not be realized, and
the combination of Pacer International and Pacer Logistics may not be
successful.
The Transportation Industry Is Highly Competitive
The transportation services industry is highly competitive. Our intermodal
marketing, trucking and logistics business competes primarily against other
domestic non-asset based transportation and logistics companies, asset-based
transportation and logistics companies, third-party freight brokers, private
shipping
16
<PAGE>
departments and freight forwarders. Our stacktrain business competes primarily
with over-the-road full truckload carriers, conventional intermodal movement of
trailers on flatcars, and containerized intermodal rail services offered
directly by railroads. We also compete with transportation service companies
for the services of independent commission agents and with trucklines for the
services of independent contractors and drivers. Some of our competitors have
substantially greater financial and other resources than we do. Historically,
competition has created downward pressure on freight rates, and continuation of
this rate pressure may materially adversely affect our net revenues and income
from operations. In addition, we buy and sell transportation services from and
to many companies with which we compete. It is possible that certain of such
customers could transfer their business away from us to other companies with
which they do not compete. For example, certain competitors of Pacer Logistics
are customers of our stacktrain operations and the loss of any one of these
customers could have a material adverse effect on our stacktrain operations.
Disruptions In Railroad Service Could Adversely Affect The Services We Provide
We depend on the major railroads in the United States for substantially all
of the intermodal transportation services we provide. In many markets, rail
service is limited to a few railroads or even a single railroad. Any reduction
in service by the railroads with whom we have relationships is likely to
materially adversely affect the services we provide. For example, from 1997 to
1998, service disruptions related to consolidation and restructuring in the
railroad industry interrupted intermodal service throughout the United States.
Service problems arising from prior mergers in the railroad industry are
currently being resolved. However, consolidation and restructuring continues to
occur in the railroad industry and it is possible that future service
disruptions could result, which would have a material adverse affect on our
stacktrain business. The division of Conrail between CSX and Norfolk Southern,
occurred in June 1999. The Conrail/CSX/Norfolk Southern transaction has
resulted in service disruptions in markets formerly served by Conrail. Although
we have not been materially adversely affected by these service disruptions, we
could be materially adversely affected by continued or more serious service
disruptions in the future. In addition, the railroads' workforce is generally
subject to collective bargaining agreements. Our business could be materially
adversely affected by labor disputes between the railroads and their union
employees. Our business would also be materially adversely affected by a work
stoppage at one or more railroads or by adverse weather conditions that hinder
the railroads' ability to provide transportation services. In addition, the
railroads are relatively free to adjust shipping rates up or down as market
conditions permit. Although the application of rate increases to our stacktrain
business is limited by our long-term contracts with the railroads, such
increases could result in higher costs to our customers which could result in
decreased demand for our services.
We Depend On APL Limited For Essential Services And We Could Be Adversely
Affected By APL Limited's Failure Or Refusal To Provide Such Services
Pursuant to long-term contracts, we transport APL Limited's international
cargo on our stacktrain network to locations in the United States using
containers and chassis which are supplied by APL Limited. Certain of APL
Limited's employees are subject to collective bargaining agreements. Our
business could be materially adversely affected by labor disputes between APL
Limited and its union employees. APL Limited also supplies us with chassis from
its equipment fleet for the transport of international freight on behalf of
international shippers other than APL Limited. Additionally, APL Limited pays
us a fee for the repositioning of its empty containers within North America so
that the containers can be reused by APL Limited in its trans-Pacific shipping
operations. The additional stacktrain volume attributable to the transport of
APL Limited's international cargo contributes to our ability to obtain certain
favorable provisions in our rail contracts. In addition, we are in the process
of negotiating with APL Limited a long-term contract, pursuant to which APL
Limited would provide us with certain computer, software and other information
technology necessary for the operation of our stacktrain business. If APL
Limited were unwilling or unable to fulfill its obligations to us under the
terms of these contracts, or if we were unable to negotiate an information
technology agreement, our business, results of operations and financial
position could be materially adversely affected.
17
<PAGE>
We Do Not Have An Independent Operating History
Since 1984, our stacktrain business has been conducted by various entities
owned directly or indirectly by APL Limited and has not had an independent
operating history. While owned by APL Limited, our stacktrain business was able
to use some of the financial and administrative resources and infrastructure of
APL Limited in such areas as treasury, legal, information systems and benefits
administration. As a result of our recapitalization, we will be required to
independently provide the infrastructure, resources and services necessary to
operate our stacktrain business independently. We cannot assure you that we
have correctly estimated the difficulties and costs of replacing the
infrastructure, resources and services necessary to successfully operate our
stacktrain business independently. In addition, the historical financial
information for Pacer International included herein may not necessarily reflect
the results of operations, financial position and cash flows in the future or
what our results of operations, financial position and cash flows would have
been had Pacer International been a separate, independent entity during the
periods presented. Also, due to a lack of historical financial information
regarding the stacktrain business on a stand-alone basis, the information
regarding the results of operations, cash flows and financial condition of
Pacer International for 1994 and 1995 is unavailable.
We Could Be Affected By The Year 2000 Problem
Some computers, software and other equipment include a computer code in
which calendar year data is abbreviated to only two digits. As a result, some
of these systems could fail to operate or fail to produce correct results
because they may misinterpret "00" to mean 1900 rather than 2000. The Year 2000
problem affects some of our computers, software and equipment. In addition, the
Year 2000 problem affects some of the computers, software and equipment of APL
Limited which we use in the operation of our stacktrain business pursuant to a
contractual arrangement between us and APL Limited. If we fail to properly
recognize and address the Year 2000 problem in our systems, or if APL Limited
fails to properly recognize and address the Year 2000 problem in its systems,
our business, financial condition and results of operations could be materially
adversely affected.
We are engaged in an ongoing process of assessing our exposure to the Year
2000 problem through our computers, software and equipment. In addition, APL
Limited has made representations to us that it will use commercially reasonable
efforts to implement a plan to resolve the Year 2000 problem as it affects
their computer systems. APL Limited has agreed to bear any costs which we might
incur due to its failure to resolve the Year 2000 problem in their computer
systems. We currently expect that we will incur incremental costs through the
end of 1999 to resolve any Year 2000 problems that relate to our information
technology systems. We are not able to estimate with certainty the amount of
these incremental costs, but we do not expect them to have a significant effect
on our financial condition or results of operations.
While we expect to identify and resolve all Year 2000 problems that could
materially adversely affect our business operations, there can be no assurance
we will be successful. However, the Year 2000 problem also affects many of our
major suppliers (including railroads) and customers, and our business could be
disrupted or otherwise materially adversely affected if any of them fail to
resolve their Year 2000 problems. We believe that it is not possible to
determine with complete certainty all Year 2000 problems affecting us, our
customers and our suppliers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We Have Risks Related To A Downturn In The Business Cycle
Historically, certain sectors of the transportation industry have been
cyclical as a result of economic recession, customers' business cycles,
increases in prices charged by third-party carriers, interest rate fluctuations
and other economic factors over which we have no control. Increased operating
expenses incurred by third-party carriers can be expected to result in higher
costs to us, and our net revenues and income from operations could be
materially adversely affected if we were unable to pass through to our
customers the full amount of increased transportation costs. Economic recession
or a downturn in our customers' business cycles
18
<PAGE>
also could have a material adverse effect on our operating results if the
volume of freight shipped by those customers were reduced. In addition, our
stacktrain business is seasonal and our quarterly revenues and profits
historically have been lower during the first and second quarters of the year
and higher during the third and fourth quarters due primarily to the retail
industry's shipping requirements.
We, Our Suppliers And Our Customers Are Subject To Government Regulation Which
Could Affect Our Results Of Operations Or Financial Condition
Pacer Logistics is licensed by the Department of Transportation as a broker
in arranging for the transportation of general commodities by motor vehicle.
The Department of Transportation has established certain requirements for
acting in this capacity, including certain insurance and surety bond
requirements. Pacer Logistics' failure to comply with these laws and
regulations, and any resultant suspension or loss of Pacer Logistics' license,
could have a material adverse effect on our results of operations or financial
condition. In addition, the transportation industry is subject to legislative
or regulatory changes that can affect the economics of the industry. Pacer
International operates in the intermodal segment of the transportation
industry, which has been essentially deregulated. Changes in the levels of
regulatory activity in the intermodal segment of the industry could
potentially affect us and our suppliers and customers. In addition, we have a
substantial number of stacktrain customers who provide ocean carriage of
intermodal shipments. The regulatory regime applicable to ocean shipping was
revised by the Ocean Shipping Reform Act of 1998, which took effect on May 1,
1999. It is unclear at this time to what extent implementation of the Ocean
Shipping Reform Act will affect our various ocean carrier customers and impact
our stacktrain business.
Fraudulent Transfer Considerations
Our payment of consideration in our recapitalization and the Pacer
Logistics transaction and the related financings, including our private
offering of the notes and the guarantee of the notes by substantially all of
our subsidiaries, may be subject to review under federal or state fraudulent
transfer laws. While the relevant laws may vary from state to state, under
such laws, the payment of consideration or the issuance of a guarantee will be
a fraudulent conveyance if (1) we paid the consideration or any of our
subsidiaries issued guarantees with the intent of hindering, delaying or
defrauding creditors, or (2) we or any of our subsidiaries received less than
reasonably equivalent value or fair consideration in return for paying the
consideration or issuing their respective guarantees, and, in the case of (2)
only, one of the following is also true:
. we were insolvent or became insolvent, or any of our subsidiaries were
insolvent or became insolvent, when we or they paid the consideration or
issued the guarantees, respectively;
. paying the consideration or issuing the guarantees left us or any of our
subsidiaries, as the case may be, with an unreasonably small amount of
capital; or
. we or any of our subsidiaries, as the case may be, intended to, or
believed that we or they would, be unable to pay debts as they matured.
If the payment of the consideration or the issuance of any guarantee were a
fraudulent conveyance, a court could, among other things, void our obligations
regarding the payment of the consideration or void any of our subsidiaries'
obligations under their respective guarantees, as the case may be, and require
the repayment of any amounts paid thereunder.
Generally, an entity will be considered insolvent if:
. the sum of its debts is greater than the fair value of its property;
. the present fair value of its assets is less than the amount that it
will be required to pay on its existing debts as they become due; or
. it cannot pay its debts as they became due.
We believe, however, that immediately after issuance of the notes and the
guarantees, we and each of our subsidiaries were solvent, had sufficient
capital to carry on our businesses and were able to pay our respective
19
<PAGE>
debts as they matured. We cannot be sure, however, as to what standard a court
would apply in making such determinations or that a court would reach the same
conclusions with regard to these issues.
You May Not Receive A Change In Control Payment
In the event of a change of control, we are required to make an offer for
cash to repurchase the notes at 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the repurchase date. However,
our credit agreement prohibits the purchase of outstanding notes prior to
repayment of the borrowings under our credit agreement and any exercise by the
holders of the notes of their right to require us to repurchase the notes may
cause an event of default under our credit agreement. In addition, we may not
have the financial resources necessary to repurchase the notes upon a change of
control.
You May Not Be Able To Sell Your Notes
There is no existing trading market for the exchange notes and no such
market may develop. The absence of such market adversely affects the liquidity
of an investment in the notes. If a market for the exchange notes does develop,
future trading prices will depend on many factors, including among other
things, prevailing interest rates and the market for similar securities,
general economic conditions and the financial condition and performance of, and
prospects for, our company. We do not intend to apply for listing of the
exchange notes on any securities exchange or for quotation through any over-
the-counter market.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The old notes were originally sold by Pacer International on May 24, 1999
(the "Issue Date"), to Morgan Stanley & Co. Incorporated, BT Alex. Brown
Incorporated which has since been renamed Deutsche Bank Securities Inc., Credit
Suisse First Boston Corporation and Credit Lyonnais Securities (USA) Inc., as
initial purchasers, pursuant to a purchase agreement, dated May 24, 1999,
between Pacer International, the subsidiaries of Pacer International listed
therein as guarantors, and the initial purchasers. The initial purchasers
subsequently resold the old notes to qualified institutional buyers in reliance
on, and subject to the restrictions imposed pursuant to Rule 144A under the
Securities Act and outside the United States in accordance with the provisions
of Regulation S under the Securities Act. Pacer International, the guarantors
and the initial purchasers also entered into the registration rights agreement
with the initial purchasers, which requires, among other things, that following
the issuance and sale of the old notes, Pacer International and the guarantors:
(1) file with the Commission within 120 days after the Issue Date, a
registration statement with respect to the exchange notes,
(2) use their commercially reasonable efforts to cause the registration
statement to become effective under the Securities Act within 180 days
after the Issue Date, and
(3) upon the effectiveness of the registration statement, offer to the
holders of the old notes the opportunity to exchange their old notes for a
like principal amount of exchange notes. Such exchange notes will be issued
without a restrictive legend and may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act subject to
certain exceptions described below. Pacer International has agreed to keep
such exchange offer open for 20 business days, or longer if required by
applicable law, after the date that notice of the exchange offer is mailed
to holders.
For each old note surrendered to Pacer International pursuant to the
exchange offer, the holder of such old note will receive an exchange note
having a principal amount equal to that of the surrendered old note. The
exchange offer being made hereby is intended to satisfy Pacer International's
exchange offer obligations under the registration rights agreement. The term
"holder" with respect to the exchange offer means any person in whose name old
notes are registered on Pacer International's books or any other person who has
obtained a properly completed bond power from the registered holder or any
person whose old notes are held of record by The Depository Trust Company
("DTC") who desires to deliver such old notes by book-entry transfer of DTC.
Under existing interpretations of the staff of the Commission contained in
several no action letters to third parties, the exchange notes, including the
related guarantees, would in general be freely transferable by holders thereof
after the exchange offer without further registration under the Securities Act.
However, any purchaser of old notes who is an "affiliate" of Pacer
International or who intends to participate in the exchange offer for the
purpose of distributing the exchange notes:
(1) will not be able to tender its old notes in the exchange offer,
(2) will not be able to rely on the interpretation of the staff of the
Commission, and
(3) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer
of the old notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
Each holder that wishes to exchange the old notes for exchange notes will be
required to represent in the letter of transmittal that:
. any exchange notes to be received by it will be acquired in the ordinary
course of its business,
. it has no arrangement or understanding with any person to participate in
the distribution, within the meaning of the Securities Act, of the
exchange notes in violation of the Securities Act,
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. it is not an "affiliate", as defined in Rule 405 promulgated under the
Securities Act, of Pacer International,
. if such holder is not a broker-dealer, that it is not engaged in, and
does not intend to engage in, the distribution of exchange notes, and
. if such holder is a broker-dealer (a "Participating Broker-Dealer") that
will receive exchange notes for its own account in exchange for old
notes that are acquired as a result of market-making or other trading
activities, that it will deliver a prospectus in connection with any
resale of such exchange notes.
The Commission has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to the exchange
notes received with the prospectus contained in the registration statement.
Each of Pacer International and the guarantors has agreed that it will make
available, during the period required by the Securities Act, a prospectus
meeting the requirements of the Securities Act for use by Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of exchange notes.
If,
(1) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, Pacer International and the
guarantors are not permitted to effect the exchange offer,
(2) the exchange offer is not consummated within 210 days of the Issue
Date,
(3) in certain circumstances, certain holders of unregistered exchange
notes so request, or
(4) in the case of any holder that participates in the exchange offer,
such holder does not receive exchange notes on the date of the exchange
that may be sold without restriction under state and federal securities
laws, other than due solely to the status of such holder as an affiliate of
Pacer International within the meaning of the Securities Act,
then in each case, Pacer International will:
. promptly upon becoming aware of any of the matters contemplated by
clauses (1)-(4) above, deliver to the holders and the trustee written
notice thereof, and
. at their sole expense, Pacer International and the guarantors will
(a) as promptly as practicable, file a shelf registration statement
covering resales of the old notes,
(b) use their commercially reasonable efforts to cause the shelf
registration statement to be declared effective under the Securities
Act, and
(c) use their commercially reasonable efforts to keep effective the
shelf registration statement until the earlier of two years after the
Issue Date or such time as all of the applicable old notes have been
sold thereunder.
Pacer International will, in the event that a shelf registration statement
is filed,
(1) provide to each holder copies of the prospectus that is a part of
the shelf registration statement,
(2) notify each such holder when the shelf registration statement for
the old notes has become effective, and
(3) take certain other actions as are required to permit unrestricted
resales of the old notes.
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A holder that sells old notes pursuant to the shelf registration statement:
(1) will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers,
(2) will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales, and
(3) will be bound by the provisions of the registration rights agreement
that are applicable to such a holder, including certain indemnification
rights and obligations.
The old notes provide, among other things, that if:
(1) the exchange offer has not been consummated on or prior to 210 days
after the Issue Date or
(2) if applicable, a shelf registration statement has been declared
effective, but ceases to be effective at any time prior to the second
anniversary of the Issue Date,
then, from the 211th day or the date the shelf registration statement ceases
to be effective, through but excluding the date the exchange offer is
consummated or the shelf registration statement becomes effective, the
interest rate on the old notes will:
(1) increase by .25% per annum for the first 90 days immediately
following such date, and
(2) thereafter increase by an additional .25% per annum, at the
beginning of each subsequent 90-day period.
The additional interest on any affected old notes may not exceed 1.0% in
the aggregate.
The summary herein highlights the material provisions of the registration
rights agreement, but does not restate that agreement in its entirety. Pacer
International urges you to review all of the provisions of the registration
rights agreement, because it, and not this description, defines your rights as
holders to exchange your old notes for registered notes. A copy of the
registration rights agreement has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
Following the consummation of the exchange offer, holders of old notes who
were eligible to participate in the exchange offer but who did not tender
their old notes will not have any further registration rights, and the old
notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the old notes could be adversely
affected.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, Pacer International will accept
all old notes validly tendered and not withdrawn prior to 5:00 p.m. New York
City time, on the expiration date. After authentication of the exchange notes
by the trustee or an authenticating agent, Pacer International will issue and
deliver $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding old notes accepted in the exchange offer.
Holders may tender some or all of their old notes pursuant to the exchange
offer in denominations of $1,000 and integral multiples thereof.
By tendering old notes in exchange for exchange notes and by executing the
letter of transmittal, each holder of old notes will be required to represent
that:
(1) it is not an affiliate of Pacer International,
(2) any exchange notes to be received by it were acquired in the
ordinary course of its business, and
(3) it has no arrangement or understanding with any person to
participate in the distribution, within the meaning of the Securities Act,
of the exchange notes.
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<PAGE>
Each Participating Broker-Dealer that receives exchange notes for its own
account in exchange for old notes, where such old notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. See "Plan of Distribution"
for a more detailed description of these procedures.
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the old notes, except that:
(1) the offering of the exchange notes has been registered under the
Securities Act,
(2) the exchange notes will not be subject to transfer restrictions, and
(3) certain provisions relating to an increase in the stated interest
rate on the old notes provided for under certain circumstances will be
eliminated.
The exchange notes will evidence the same debt as the old notes. The
exchange notes will be issued under and entitled to the benefits of the
indenture.
As of the date of this prospectus, $150,000,000 aggregate principal amount
of the old notes is outstanding. In connection with the issuance of the old
notes, Pacer International arranged for the old notes to be issued and
transferable in book-entry form through the facilities of DTC, acting as a
depositary. The exchange notes will also be issuable and transferable in book-
entry form through DTC.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders of the old notes as of the close
of business on , 1999. The exchange offer is not conditioned upon any
minimum aggregate principal amount of old notes being tendered. However, the
exchange offer is subject to certain customary conditions which may be waived
by Pacer International, and to the terms and provisions of the registration
rights agreement. See "--Conditions to the Exchange Offer" for a detailed
description of such conditions.
Pacer International shall be deemed to have accepted validly tendered old
notes when, as and if Pacer International has given oral or written notice
thereof to the exchange agent. The exchange agent will act as agent for the
tendering holders for the purpose of receiving exchange notes from Pacer
International and delivering exchange notes to such holders.
If any tendered old notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted old notes will be returned, at Pacer
International's cost, to the tendering holder thereof as promptly as
practicable after the expiration date.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. Pacer International will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "--Solicitation of Tenders; Fees and Expenses" for more detailed
information regarding the expenses of the exchange offer.
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless Pacer International, in its sole discretion, extends the
exchange offer, in which case the term "expiration date" shall mean the latest
date to which the exchange offer is extended. Pacer International may extend
the exchange offer at any time and from time to time by giving oral or written
notice to the exchange agent and by timely public announcement.
Pacer International expressly reserves the right, in its sole discretion:
24
<PAGE>
(1) to delay acceptance of any old notes, to extend the exchange offer
or to terminate the exchange offer and to refuse to accept old notes not
previously accepted, if any of the conditions set forth herein under "--
Conditions to the Exchange Offer" shall have occurred and shall not have
been waived by Pacer International, if such conditions are permitted to be
waived by Pacer International, by giving oral or written notice of such
delay, extension or termination to the exchange agent, and
(2) to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof by Pacer
International to the registered holders of the old notes.
If the exchange offer is amended in a manner determined by Pacer
International to constitute a material change, Pacer International will
promptly disclose such amendment in a manner reasonably calculated to inform
the holders of such amendment and Pacer International will extend the exchange
offer to the extent required by law.
Without limiting the manner in which Pacer International may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the exchange offer, Pacer International shall have no obligation
to publish, advise, or otherwise communicate any such public announcement,
other than by making a timely release thereof to the Dow Jones News Service.
Interest on the Exchange Notes
Interest on the exchange notes will accrue from the last interest payment
date on which interest was paid on the old notes surrendered in exchange
therefor or, if no interest has been paid on the old notes, from the Issue
Date. The exchange notes will bear interest at a fixed rate of 11 3/4% per
annum. Interest on the exchange notes will be payable semi-annually on June 1
and December 1 of each year commencing on December 1, 1999.
Procedures for Tendering
Each holder of old notes wishing to accept the exchange offer must complete,
sign and date the letter of transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein. Each holder shall then mail
or otherwise deliver such letter of transmittal, or such facsimile, together
with the old notes to be exchanged and any other required documentation, to
Wilmington Trust Company, as exchange agent, at the address set forth herein
and therein. A holder may also effect a tender of old notes pursuant to the
procedures for book-entry transfer as provided for herein and therein. By
executing the letter of transmittal, each holder will represent to Pacer
International that, among other things,
(1) the exchange notes acquired pursuant to the exchange offer are being
acquired in the ordinary course of business of the person receiving such
exchange notes, whether or not such person is the holder,
(2) that neither the holder nor any such other person has any
arrangement or understanding with any person to participate in the
distribution of such exchange notes, and
(3) that neither the holder nor any such other person is an "affiliate,"
as defined in Rule 405 under the Securities Act, of Pacer International.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the old notes by causing DTC to
transfer such old notes into the exchange agent's account in accordance with
DTC's procedure for such transfer. Although delivery of old notes may be
effected through book-entry transfer into the exchange agent's account at DTC,
the letter of transmittal, or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the exchange agent at its address set forth herein under "--
Exchange Agent"
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<PAGE>
prior to 5:00 p.m., New York City time, on the expiration date. Delivery of
documents to DTC in accordance with its procedures does not constitute delivery
to the exchange agent.
Only a holder may tender its old notes in the exchange offer. To tender in
the exchange offer, a holder must:
(1) complete, sign and date the letter of transmittal or a facsimile
thereof,
(2) have the signatures thereof guaranteed if required by the letter of
transmittal,
and
(3) unless such tender is being effected pursuant to the procedure for
bookentry transfer, mail or otherwise deliver such letter of transmittal or
such facsimile, together with the old notes and other required documents,
to the exchange agent, prior to 5:00 p.m., New York City time, on the
expiration date.
The tender by a holder will constitute an agreement between such holder,
Pacer International and the exchange agent in accordance with the terms and
subject to the conditions set forth herein and in the letter of transmittal. If
less than all of the old notes are tendered, a tendering holder should fill in
the amount of old notes being tendered in the appropriate box on the letter of
transmittal. The entire amount of old notes delivered to the exchange agent
will be deemed to have been tendered unless otherwise indicated.
The letter of transmittal will include representations to Pacer
International that, among other things,
(1) the exchange notes acquired pursuant to the exchange offer are being
acquired in the ordinary course of business of the person receiving such
exchange notes, whether or not such person is the holder,
(2) neither the holder nor any such other person is engaged in, intends
to engage in or has any arrangement or understanding with any person to
participate in the distribution of such exchange notes,
(3) neither the holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of Pacer International, and
(4) if the tendering holder is a broker or dealer as defined in the
Exchange Act, then:
(a) it acquired the old notes for its own account as a result of
market-making activities or other trading activities, and
(b) it has not entered into any arrangement or understanding with
Pacer International or any "affiliate" thereof within the meaning of
Rule 405 under the Securities Act to distribute the exchange notes to
be received in the exchange offer.
In the case of a broker-dealer that receives exchange notes for its own
account in exchange for old notes which were acquired by it as a result of
market-making or other trading activities, the letter of transmittal will also
include an acknowledgement that the broker-dealer will deliver a copy of this
prospectus in connection with the resale by it of exchange notes received
pursuant to the exchange offer; however, by so acknowledging and by delivering
a prospectus, such holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
The method of delivery of old notes and the letter of transmittal and all
other required documents to the exchange agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to ensure delivery to the exchange agent prior to the expiration date.
No letter of transmittal or old notes should be sent to Pacer International.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for holders, in each case
as set forth herein and in the letter of transmittal.
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<PAGE>
Any beneficial owner whose old notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his old notes, either make
appropriate arrangements to register ownership of the old notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution"), unless the old
notes tendered pursuant thereto are tendered by a registered holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instruction" of the letter of transmittal or for the account of an
Eligible Institution. If the letter of transmittal is signed by a person other
than the registered holder listed therein, such old notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender
the old notes on behalf of the registered holder, in either case signed as the
name of the registered holder or holders appears on the old notes. If the
letter of transmittal or any old notes or bond powers are signed or endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Pacer
International, evidence satisfactory to Pacer International of their authority
to so act must be submitted with such letter of transmittal.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of the tendered old notes will be determined
by Pacer International in its sole discretion, which determination will be
final and binding. Pacer International reserves the absolute right to reject
any and all old notes not properly tendered or any old notes Pacer
International's acceptance of which would, in the opinion of counsel for Pacer
International, be unlawful. Pacer International also reserves the absolute
right to waive any irregularities or conditions of tender as to particular old
notes. Pacer International's interpretation of the terms and conditions of the
exchange offer including the instructions in the letter of transmittal will be
final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
old notes must be cured within such time as Pacer International shall
determine. Although Pacer International intends to notify holders of defects or
irregularities with respect to tender of old notes, neither Pacer
International, the exchange agent nor any other person shall be under any duty
to give notification of defects or irregularities with respect to tenders of
old notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of old notes will not be deemed to have been made until
such irregularities have been cured or waived. Any old notes received by the
exchange agent that Pacer International determines are not properly tendered or
the tender of which is otherwise rejected by Pacer International and as to
which the defects or irregularities have not been cured or waived by Pacer
International will be returned by the exchange agent to the tendering holder
unless otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In addition, Pacer International reserves the right in its sole discretion:
(1) to purchase or make offers for any old notes that remain outstanding
subsequent to the expiration date, or, as set forth under "--Conditions to
the Exchange Offer," terminate the exchange offer, and
(2) to the extent permitted by applicable law, to purchase old notes in
the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
exchange offer.
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Book-Entry Transfer
Pacer International understands that the exchange agent will make a request
promptly after the date of this prospectus to establish accounts with respect
to the old notes at DTC, the book-entry transfer facility, for the purpose of
facilitating the exchange offer. Subject to the establishment thereof, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of old notes by causing such
book-entry transfer facility to transfer such old notes into the exchange
agent's account with respect to the old notes in accordance with the book-entry
transfer facility's Automated Tender Offer Program procedures for such
transfer. However, the exchange for the old notes so tendered will only be made
after a timely confirmation of a book-entry transfer of such old notes into the
exchange agent's account, and timely receipt by the exchange agent of an agents
message and any other documents required by the letter of transmittal.
The term "agent's message" means a message, transmitted by the book-entry
transfer facility and received by the exchange agent and forming part of the
confirmation of a book-entry transfer, which states that the book-entry
transfer facility has received an express acknowledgment from a participant
tendering old notes and that such participant has received the letter of
transmittal and agrees to be bound by the terms of the letter of transmittal,
and Pacer International may enforce such agreement against the participant.
Although delivery of old notes may be effected through book-entry transfer into
the exchange agents account at the book-entry transfer facility, an appropriate
letter of transmittal properly completed and duly executed with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, or, if the guaranteed
delivery procedures described below are complied with within the time period
provided under such procedures. Delivery of documents to the book-entry
transfer facility does not constitute delivery to the exchange agent.
Guaranteed Delivery Procedures
Holders who wish to tender their old notes and whose old notes are not
immediately available, or who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent prior to the
expiration date, or who cannot complete the procedure for book-entry transfer
on a timely basis, may effect a tender if:
(1) the tender is made through an Eligible Institution;
(2) prior to the expiration date, the exchange agent receives from such
Eligible Institution a properly completed and duly executed notice of
guaranteed delivery, by facsimile transmittal, mail or hand delivery
(a) setting forth the name and address of the holder, the
certificate number or numbers of such holder's old notes and the
principal amount of such old notes tendered,
(b) stating that the tender is being made thereby,
(c) and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal or
facsimile thereof, together with the certificate(s) representing the
old notes to be tendered in proper form for transfer, or confirmation
of a book-entry transfer into the exchange agent's account at DTC of
old notes delivered electronically, and any other documents required by
the letter of transmittal, will be deposited by the Eligible
Institution with the exchange agent; and
(3) such properly completed and executed letter of transmittal, or
facsimile thereof, together with the certificate(s) representing all
tendered old notes in proper form for transfer, or confirmation of a
book-entry transfer into the exchange agent's account at DTC of old notes
delivered electronically and all other documents required by the letter of
transmittal are received by the exchange agent within three NYSE trading
days after the expiration date.
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Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of old notes may be withdrawn
at any time prior to 5:00 p.m. New York City time, on the expiration date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be received by the exchange agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the expiration date. Any such
notice of withdrawal must:
(1) specify the name of the person having deposited the old notes to be
withdrawn (the "Depositor"),
(2) identify the old notes to be withdrawn, including the certificate
number or numbers and principal amount of such old notes or, in the case of
old notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited,
(3) be signed by the Depositor in the same manner as the original
signature on the letter of transmittal by which such old notes were
tendered, including any required signature guarantee or be accompanied by
documents of transfer sufficient to permit the trustee with respect to the
old notes to register the transfer of such old notes into the name of the
Depositor withdrawing the tender, and
(4) specify the name in which any such old notes are to be registered,
if different from that of the Depositor.
All questions as to the validity, form and eligibility, including time of
receipt of such withdrawal notices will be determined by Pacer International,
whose determination shall be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer, and no exchange notes will be issued with respect thereto
unless the old notes so withdrawn are validly retendered. Any old notes that
have been tendered but are not accepted for exchange will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn old notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
expiration date.
Conditions to the Exchange Offer
Notwithstanding any other term of the exchange offer, Pacer International
will not be required to accept for exchange, or to exchange exchange notes for,
any old notes, and may terminate or amend the exchange offer as provided herein
before the acceptance of such old notes if, in Pacer International's judgment,
any of the following conditions has occurred or exists or has not been
satisfied:
(1) that the exchange offer, or the making of any exchange by a holder,
violates applicable interpretation of the staff of the Commission,
(2) that any action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency or body
with respect to the exchange offer, or
(3) that there has been adopted or enacted any law, statute, rule or
regulation that can reasonably be expected to impair the ability of Pacer
International to proceed with the exchange offer.
If Pacer International determines that it may terminate the exchange offer
for any of the reasons set forth above, Pacer International may:
(1) refuse to accept any old notes and return any old notes that have
been tendered to the holders thereof,
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<PAGE>
(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:
<TABLE>
<C> <S>
By Registered or Certified Mail: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration,
Ann Roberts
By Hand Delivery before 4:30 p.m.: Wilmington Trust Company Rodney
Square North
1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration,
Ann Roberts
By Overnight Courier and by Hand Wilmington Trust Company Rodney
Delivery after 4:30 p.m. on the Square North
Expiration Date: 1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration,
Ann Roberts
Facsimile Transmission: (302) 651-8882
Information or Confirmation by Telephone: (302) 651-8681
</TABLE>
Delivery to an address or facsimile number other than those listed above
will not constitute a valid delivery.
Solicitation of Tenders; Fees and Expenses
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by Pacer International. The principal solicitation pursuant to the
exchange offer is being made by mail. Additional solicitations may be made by
officers and regular employees of Pacer International and its affiliates in
person, by telegraph, telephone or telecopier.
Pacer International has not retained any dealer-manager in connection with
the exchange offer and will not make any payments to broker, dealers or other
persons soliciting acceptances of the exchange offer. Pacer
30
<PAGE>
International will, however, pay the exchange agent reasonable and customary
fees for its services and will reimburse the exchange agent for its reasonable
out-of-pocket costs and expenses in connection therewith and will indemnify
the exchange agent for all losses and claims incurred by it as a result of the
exchange offer.
Pacer International may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this prospectus, letters of transmittal and
related documents to the beneficial owners of the old notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting
and legal fees and printing costs, will be paid by Pacer International.
Pacer International will pay all transfer taxes, if any, applicable to the
exchange of old notes pursuant to the exchange offer. If, however,
certificates representing exchange notes or old notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the old notes tendered, or if tendered old notes are registered in
the name of any person other than the person signing the letter of
transmittal, or if the transfer tax is imposed for any reason other than the
exchange of old notes pursuant to the exchange offer, then the amount of any
such transfer taxes, whether imposed on the registered holder or any other
persons, will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the letter
of transmittal, the amount of such transfer taxes will be billed by Pacer
International directly to such tendering holder.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the old
notes, as reflected in Pacer International's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by Pacer International as a result of the consummation of the
exchange offer. The expenses of the exchange offer will be deferred and
amortized by Pacer International over the term of the exchange notes using the
effective interest method.
Consequences of Failure to Exchange
As a result of the making of, and upon acceptance for exchange of all
validly tendered old notes pursuant to the terms of, this exchange offer,
Pacer International will have fulfilled a covenant contained in the
registration rights agreement. Holders of the old notes who do not tender
their old notes in the exchange offer will continue to hold such old notes and
will be entitled to all the rights, and subject to the limitations applicable
thereto, under the indenture and the registration rights agreement, except for
any such rights under the registration rights agreement that by their terms
terminate or cease to have further effect as a result of making of this
exchange offer. All untendered old notes will continue to be subject to the
restrictions on transfer set forth in the indenture. Accordingly, such old
notes may be resold only
(1) to Pacer International,
(2) pursuant to a registration statement which has been declared
effective under the Securities Act,
(3) in the United States to qualified institutional buyers within the
meaning of Rule 144A in reliance upon the exemption from the registration
requirements of the Securities Act provided by Rule 144A,
(4) in the United States to Institutional Accredited Investors, as
defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities
Act, in transactions exempt from the registration requirements of the
Securities Act,
31
<PAGE>
(5) outside the United States to foreign persons in transactions
complying with the provisions of Regulation S under the Securities Act, or
(6) pursuant to any available exemption from the registration
requirements under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
To the extent that old notes are tendered and accepted in the exchange
offer, the liquidity of the trading market for untendered old notes could be
adversely affected.
32
<PAGE>
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any cash proceeds from
the exchange offer.
33
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain unaudited pro forma consolidated financial
information for our company. The Unaudited Pro Forma Consolidated Balance Sheet
as of April 2, 1999 gives effect to our recapitalization and the Pacer
Logistics transaction as if they had occurred at April 2, 1999. The Unaudited
Pro Forma Consolidated Statements of Operations for the year ended December 25,
1998, the three months ended April 2, 1999, and the twelve months ended April
2, 1999 give effect to our recapitalization and the Pacer Logistics transaction
using the purchase method of accounting for the Pacer Logistics transaction, as
if our recapitalization and the Pacer Logistics transaction had occurred at the
beginning of the first period presented.
The unaudited pro forma adjustments, as described in the notes to the
unaudited pro forma consolidated financial information are based on available
information and upon certain assumptions that we believe are reasonable. The
purchase of Pacer Logistics has been reflected based on preliminary estimates
of fair values, which may be updated based on final appraisals and other
estimates of fair value.
We do not claim or represent that the unaudited pro forma consolidated
statement of operations information set forth below is indicative of the
results that would have been reported had the transactions actually occurred at
the beginning of the period presented nor is it indicative of our future
results. There can be no assurance that the assumptions used in the preparation
of the unaudited pro forma consolidated financial information, which we believe
to be appropriate in the circumstances, will prove to be correct. The unaudited
pro forma consolidated information should be read in conjunction with the
historical consolidated financial statements of our company and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. See also "Our
Recapitalization."
34
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
April 2, 1999
(in thousands)
<TABLE>
<CAPTION>
Pacer Logistics
Pacer Pacer Completed 1999 Pro Forma
International(a) Logistics(b) Acquisition Adjustments Pro Forma
---------------- ------------ --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ -- $ 10 $ -- $ -- $ 10
Accounts receivable,
net................... 60,700 41,492 -- -- 102,192
Prepaid expenses and
other................. 1,000 1,926 -- -- 2,926
Deferred income taxes.. -- 597 -- -- 597
-------- -------- ------ --------- ---------
Total current assets.... 61,700 44,025 -- -- 105,725
Property and equipment:
Property and equipment
at cost............... 95,500 5,323 32(c) (40,000)(d) 60,855
Accumulated
depreciation.......... (8,400) (1,170) -- -- (9,570)
-------- -------- ------ --------- ---------
Property and equipment,
net.................... 87,100 4,153 32 (40,000) 51,285
Other assets:
Intangible assets,
net................... 19,100 60,932 8,218(c) 54,998 (e) 143,248
Deferred income taxes.. -- 73 -- 85,000 (f) 85,073
Other assets........... 2,800 1,885 -- 8,200 (g) 12,885
-------- -------- ------ --------- ---------
Total other assets...... 21,900 62,890 8,218 148,198 241,206
-------- -------- ------ --------- ---------
Total assets............ $170,700 $111,068 $8,250 $ 108,198 $ 398,216
======== ======== ====== ========= =========
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of
long-term debt and
capital leases........ $ -- $ 3,294 $ -- $ (3,294)(h) $ --
Accounts payable and
accrued expenses...... 95,500 39,198 -- -- 134,698
-------- -------- ------ --------- ---------
Total current
liabilities............ 95,500 42,492 -- (3,294) 134,698
Long-term liabilities:
Revolver............... -- -- -- -- --
Employee benefits...... 500 710 -- -- 1,210
Deferred income taxes.. 15,700 -- -- (15,700)(f) --
Long-term debt and
capital leases........ -- 47,064 8,250(c) 229,686 (i) 285,000
-------- -------- ------ --------- ---------
Total long-term
liabilities............ 16,200 47,774 8,250 213,986 286,210
-------- -------- ------ --------- ---------
Total liabilities....... 111,700 90,266 8,250 210,692 420,908
Minority interest--
exchangeable preferred
stock.................. -- -- -- 24,300 (j) 24,300
Stockholders' equity
(divisional control
account):
Preferred stock........ -- 4 -- (4)(k) --
Common stock........... -- 1 -- 104,399 (l) 104,400
Paid in capital........ -- 14,254 -- (14,254)(m) --
Retained earnings
(deficit) (divisional
control account)...... 59,000 6,543 -- (216,935)(n) (151,392)
-------- -------- ------ --------- ---------
Equity (deficit)........ 59,000 20,802 -- (126,794) (46,992)
-------- -------- ------ --------- ---------
Total liabilities and
equity................. $170,700 $111,068 $8,250 $ 108,198 $ 398,216
======== ======== ====== ========= =========
</TABLE>
See Accompanying Notes to the Unaudited Pro Forma Consolidated Balance Sheet
35
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 2, 1999
(in thousands)
(a) Represents the historical unaudited balance sheet of Pacer International,
Inc. as of April 2, 1999 (prior to the consummation of our
recapitalization, Pacer International was known as APL Land Transport
Services, Inc.). Prior to November 1998, Pacer International operated as
the American President Lines Stacktrain Services division of APL Land
Transport Services, Inc.
(b) Represents the historical unaudited balance sheet of Pacer Logistics, Inc.
as of March 31, 1999 (prior to the consummation of the Pacer Logistics
transaction, Pacer Logistics, Inc. was known as Pacer International, Inc.).
(c) On April 20, 1999, Pacer Logistics completed an acquisition of certain of
the assets of Keystone Terminals, Inc. Pacer Logistics financed the
purchase with long-term debt of $8,250 and acquired property and equipment
of $32. This acquisition resulted in goodwill of $8,218 which is being
amortized over 40 years.
(d) In connection with our recapitalization, we completed a sale and leaseback
transaction for certain railcars purchased in 1998, resulting in the
elimination of $40,000 of property and equipment at cost.
(e) The acquisition of Pacer Logistics will be accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16 and the
preliminary purchase price of $133,908 plus fees of $500 results in a total
purchase price of $134,408 and will be allocated to the assets and
liabilities based upon fair market values at the date of acquisition.
<TABLE>
<S> <C> <C>
The purchase allocation, preliminary in nature and
subject to change, is as follows:
Existing book value of Pacer Logistics.................. $ 20,802
Elimination of historical intangible assets of Pacer
Logistics.............................................. (60,932)
Elimination of Keystone Terminals acquisition goodwill.. (8,218)
Goodwill created in the Pacer Logistics acquisition..... 124,148
-------
Net adjustment to intangible assets.................... 54,998
Assumption of Pacer Logistics debt and capital lease,
current portion........................................ 3,294
Assumption of Pacer Logistics debt and capital lease,
long-term (including debt incurred with Keystone
Terminals acquisition)................................. 55,314
--------
Total purchase price................................... $134,408
========
</TABLE>
(f) In connection with our recapitalization, a Section 338(h)(10) election was
made to allow the recapitalization of Pacer International to be treated as
an acquisition of assets for tax purposes. The recapitalization gave rise
to the reversal of the existing deferred tax balances in the amount of
$15,700 and created a deferred tax asset in the amount of approximately
$85,000, associated with the step up for tax purposes. We believe that it
is more likely than not that the results of future operations will generate
sufficient taxable income to realize the deferred tax asset and
accordingly, no valuation allowance was recorded.
(g) Represents the estimated costs and fees associated with our
recapitalization and the Pacer Logistics transaction:
<TABLE>
<CAPTION>
Total
-------
<S> <C>
Debt issuance costs.................................................. $ 8,200
Acquisition fees..................................................... 500
Recapitalization fees................................................ 15,392
-------
Total.............................................................. $24,092
=======
</TABLE>
36
<PAGE>
(h) Reflects the repayment of the current portion of the Pacer Logistics long-
term debt and capital leases.
(i) Reflects the debt incurred in connection with our recapitalization and the
Pacer Logistics transaction and the repayment of existing long-term debt,
including debt incurred in Pacer Logistics' Keystone Terminals acquisition.
We have entered into the Senior Credit Facilities which consists of a
seven-year $135,000 Term Loan and a five year $100,000 Revolving Credit
Facility.
<TABLE>
<S> <C>
Borrowings under Term Loan....................................... $135,000
Issuance of Senior Subordinated Notes ........................... 150,000
Repayment of Pacer Logistics long-term debt and capital leases... (55,314)
--------
$229,686
========
</TABLE>
(j) Reflects the issuance of Pacer Logistics 7.5% Exchangeable Preferred Stock
with an aggregate stated value of $24,300 to certain members of management
in exchange for Pacer Logistics common stock held by them.
(k) Reflects the purchase of Pacer Logistics historical preferred stock in
connection with the Pacer Logistics transaction.
(l) Reflects our recapitalization and the Pacer Logistics transaction
adjustments for common stock:
<TABLE>
<S> <C>
Issuance of common stock to affiliates of Apollo Management...... $ 93,900
Issuance of common stock to affiliates of Deutsche Bank
Securities Inc. and Credit Suisse First Boston Corporation...... 3,000
Rollover of common stock from APL Limited........................ 7,500
Elimination of Pacer Logistics historical common stock........... (1)
--------
$104,399
========
</TABLE>
(m) Reflects the elimination of Pacer Logistics historical paid-in capital in
connection with the Pacer Logistics transaction in accordance with purchase
accounting.
(n) Reflects our recapitalization and the Pacer Logistics transaction
adjustments for retained earnings:
<TABLE>
<S> <C>
Elimination of Pacer International historical divisional
control account............................................... $ (59,000)
Elimination of Pacer Logistics historical retained earnings.... (6,543)
Transaction fees associated with the issuance of common
stock(g)...................................................... (15,392)
Rollover of common stock from Pacer International.............. (7,500)
Adjustment to record acquisition of Pacer International equity
from APL Limited.............................................. (204,900)
Exchange of Pacer Logistics common stock for Pacer Logistics
7.5% Exchangeable Preferred Stock............................. (24,300)
Elimination of Pacer International historical deferred tax
liability..................................................... 15,700
Recognition of deferred tax asset associated with our
recapitalization(f)........................................... 85,000
---------
$(216,935)
=========
</TABLE>
37
<PAGE>
PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended December 25, 1998
(in thousands)
<TABLE>
<CAPTION>
Pacer Pacer Pacer Logistics Pacer
International Logistics Completed 1998 & Pacer Logistics Pro Forma International
Historical (a) Historical (b)(q) 1999 Acquisitions (c) Pro Forma Adjustments Pro Forma
-------------- ----------------- --------------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $590,800 $252,762 $155,844 $408,606 $(17,776)(d) $981,630
Cost of purchased
transportation and
services............... 466,300 211,222 135,269 346,491 (32,376)(e) 780,415
-------- -------- -------- -------- -------- --------
Net revenues........... 124,500 41,540 20,575 62,115 14,600 201,215
Operating expenses:
Direct operating
expenses.............. 62,400 329 35 364 2,527 (f) 65,291
Selling, general and
administrative
expenses.............. 29,000 28,054 15,625 43,679 3,075 (g)(h) 75,754
Amortization........... 600 1,334 746 2,080 1,016 (i) 3,696
Other (income) /
expense............... (700) -- 16 16 -- (684)
Transaction costs...... -- 1,500 625 2,125 -- 2,125
-------- -------- -------- -------- -------- --------
Total operating
expenses.............. 91,300 31,217 17,047 48,264 6,618 146,182
-------- -------- -------- -------- -------- --------
Income from
operations............ 33,200 10,323 3,528 13,851 7,982 55,033
Interest income /
(expense).............. -- (2,867) (1,907) (4,774) (25,329)(j) (30,103)
-------- -------- -------- -------- -------- --------
Income before income
taxes, minority
interest and
extraordinary loss.... 33,200 7,456 1,621 9,077 (17,347) 24,930
Income taxes............ 12,600 3,182 766 3,948 (6,696)(k) 9,852
Minority interest....... -- -- -- -- 1,823 (l) 1,823
-------- -------- -------- -------- -------- --------
Income before
extraordinary loss.... $ 20,600 $ 4,274 $ 855 $ 5,129 $(12,474) $ 13,255
======== ======== ======== ======== ======== ========
Other Financial
Data(m)(n):
Depreciation........... $ 6,000 $ 699 $ 387 $ 1,086 $ (973) $ 6,113
</TABLE>
See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of
Operations
38
<PAGE>
PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended April 2, 1999
(in thousands)
<TABLE>
<CAPTION>
Pacer
Logistics
Pacer Pacer Completed Pacer Pacer
International Logistics 1998 & 1999 Logistics Pro Forma International
Historical Historical(q) Acquisitions(o) Pro Forma Adjustments Pro Forma
------------- ------------- --------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $163,600 $89,892 $5,297 $95,189 $(4,894)(d) $253,895
Cost of purchased
transportation and
services............... 129,800 75,164 4,556 79,720 (8,544)(e) 200,976
-------- ------- ------ ------- ------- --------
Net revenues........... 33,800 14,728 741 15,469 3,650 52,919
Operating expenses:
Direct operating
expenses.............. 18,100 103 -- 103 517 (f) 18,720
Selling, general and
administrative
expenses.............. 8,000 10,455 302 10,757 594 (g)(h) 19,351
Amortization........... 100 474 54 528 246 (i) 874
Other
(income)/expense...... -- -- -- -- -- --
Transaction costs...... -- -- -- -- -- --
-------- ------- ------ ------- ------- --------
Total operating
expenses.............. 26,200 11,032 356 11,388 1,357 38,945
-------- ------- ------ ------- ------- --------
Income from
operations............ 7,600 3,696 385 4,081 2,293 13,974
Interest
income/(expense)....... -- (1,126) (124) (1,250) (6,225)(j) (7,475)
-------- ------- ------ ------- ------- --------
Income before income
taxes, minority
interest and
extraordinary loss.... 7,600 2,570 261 2,831 (3,932) 6,499
Income taxes............ 2,800 1,100 107 1,207 (1,511)(k) 2,496
Minority interest....... -- -- -- -- 456 (l) 456
-------- ------- ------ ------- ------- --------
Income before
extraordinary loss.... $ 4,800 $ 1,470 $ 154 $ 1,624 $(2,877) $ 3,547
======== ======= ====== ======= ======= ========
Other Financial
Data(m)(n):
Depreciation........... $ 1,700 $ 290 $ 5 $ 295 $ (358) $ 1,637
</TABLE>
See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of
Operations
39
<PAGE>
PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Twelve Months Ended April 2, 1999
(in thousands)
<TABLE>
<CAPTION>
Pacer
Logistics Pro
Pacer Pacer Completed Pacer Forma Pacer
International Logistics 1998 & 1999 Logistics Adjust- International
Historical Historical(q) Acquisitions(p) Pro Forma ments Pro Forma
------------- ------------- --------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $604,200 $292,292 $110,909 $403,201 $(20,009)(d) $987,392
Cost of purchased
transportation and
services............... 476,500 244,383 96,765 341,148 (34,609)(e) 783,039
-------- -------- -------- -------- -------- --------
Net revenues........... 127,700 47,909 14,144 62,053 14,600 204,353
Operating expenses:
Direct operating
costs................. 63,300 385 -- 385 2,231 (f) 65,916
Selling, general and
administrative
expenses.............. 29,200 32,799 10,817 43,616 3,075 (g)(h) 75,891
Amortization........... 600 1,590 493 2,083 1,013 (i) 3,696
Other
(income)/expense...... (700) -- -- -- -- (700)
Transaction costs...... -- 1,500 625 2,125 -- 2,125
-------- -------- -------- -------- -------- --------
Total operating
expenses.............. 92,400 36,274 11,935 48,209 6,319 146,928
-------- -------- -------- -------- -------- --------
Income from
operations............ 35,300 11,635 2,209 13,844 8,281 57,425
Interest
income/(expense)....... -- (3,439) (1,407) (4,846) (25,236)(j) (30,082)
-------- -------- -------- -------- -------- --------
Income before income
taxes, minority
interest and
extraordinary loss ... 35,300 8,196 802 8,998 (16,955) 27,343
Income taxes............ 13,400 3,517 386 3,903 (6,536)(k) 10,767
Minority interest....... -- -- -- -- 1,823 (l) 1,823
-------- -------- -------- -------- -------- --------
Income before
extraordinary loss.... $ 21,900 $ 4,679 $ 416 $ 5,095 $(12,242) $ 14,753
======== ======== ======== ======== ======== ========
Other Financial
Data(m)(n):
Depreciation........... $ 6,100 $ 866 $ 235 $ 1,101 $ (1,269) $ 5,932
</TABLE>
See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of
Operations
40
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
(a) Represents amounts derived from the historical audited statement of
operations of Pacer International, Inc. for the year ended December 25,
1998 (prior to the consummation of our recapitalization, Pacer
International was known as APL Land Transport Services, Inc.). Prior to
November 1998, Pacer International operated as the American President Lines
Stacktrain Services division of APL Land Transport Services, Inc.
(b) Represents amounts derived from the historical audited consolidated
statement of operations of Pacer Logistics, Inc. for the year ended
December 31, 1998 (prior to the consummation of the Pacer Logistics
transaction, Pacer Logistics, Inc. was known as Pacer International, Inc.).
(c) Pacer Logistics acquired Intraco Inc. April 3, 1998, Cross Con Transport,
Inc. and Cross Con Terminals, Inc. on June 6, 1998, Professional Logistics
Management Co., Inc. and 3PL Corporation on July 26, 1998, Manufacturers
Consolidation Service, Inc. and its subsidiaries Levcon, Inc., MCS of
Kansas, Inc. and Manufacturers Consolidation Service of Canada Inc. on
December 10, 1998 and Keystone Terminals, Inc. (DE) and Keystone Terminals,
Inc. (NJ) on April 20, 1999. The schedule below presents the unaudited
historical combined results of operations of the acquired businesses for
the periods from January 1, 1998 until their respective acquisitions by
Pacer Logistics, except for the Keystone companies, which were acquired in
1999 and are included for the full year.
<TABLE>
<CAPTION>
Completed
Cross Professional Pro Forma 1998 & 1999
Intraco Con Logistics MCS(1) Keystone Adjustments Acquisitions
------- ------- ------------ ------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
--------
(1) As part of the acquisition of the Manufacturers Consolidation Service
companies in December 1998, Pacer Logistics elected to exit such
companies' over the road trucking business. The divestiture of this
business was completed in February 1999. Over the road trucking gross
revenues, cost of purchased transportation and services, selling,
general and administrative expenses, interest expense, income taxes and
EBITDA of $8,365, $7,644, $1,249, $105, $247 and $82, respectively,
have been appropriately excluded from the Manufacturers Consolidation
Service companies results of operations presented.
(2) Reflects the elimination of $464 in intercompany revenues and costs
between Pacer Logistics and Intraco.
(3) As part of the acquisition of the Manufacturers Consolidation Service
companies in December 1998, Pacer Logistics initiated a plan of
employee reductions which were made in February, 1999, resulting
41
<PAGE>
in the elimination of salaries and benefits of $900 annually in
connection with the employees subject to the reductions.
(4) As part of the acquisitions of Intraco, the Cross Con companies, the
Manufacturers Consolidation Service companies and the Keystone
companies in April, June and December 1998 and April 1999,
respectively, the former owners' annual salaries and benefits were
contractually reduced by $7, $18, $786 and $893, respectively,
aggregating $1,704.
(5) Reflects the elimination of historical goodwill amortization for
completed 1998 and 1999 acquisitions of $80 and recognition of goodwill
amortization, as if the completed 1998 and 1999 acquisitions had
occurred on January 1, 1998, of $746, resulting in a net adjustment of
$666.
(6) Reflects the elimination of historical interest expense relating to
assumed debt paid off at the closing of the acquisition of $576 and
recognition of interest expense that Pacer Logistics would have
incurred had the completed 1998 and 1999 acquisitions occurred on
January 1, 1998, based on Pacer Logistics' historical average interest
rate of 8.04% of $1,879, resulting in a net adjustment of $1,303.
(7) Reflects the adjustment to the provision for income taxes which Pacer
Logistics would have recorded (based on Pacer Logistics' tax rate) had
the completed 1998 and 1999 acquisitions occurred on January 1, 1998.
This adjustment includes an increase in the tax provision for Intraco,
the Cross Con companies and the Keystone companies, which were
previously taxed as Subchapter S corporations.
(d) Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Twelve Months
December 25, Ended April 2, Ended April 2,
1998 1999 1999
----------------- -------------- --------------
<S> <C> <C> <C>
Intercompany revenues and
cost elimination on net
sales between Pacer In-
ternational and Pacer
Logistics............... $(24,376) $(6,544) $(26,609)
Management fee to be
charged to APL Limited
for services rendered in
connection with the
Stacktrain Services
Agreement............... 6,600 1,650 6,600
-------- ------- --------
$(17,776) $(4,894) $(20,009)
======== ======= ========
</TABLE>
(e) As an integral part of the Pacer International acquisition of Pacer
Logistics, Pacer International has reached an agreement with a third-party
transportation provider, which effectively provides Pacer International
with $8,000 in annual rate reductions or a $2,000 quarterly reduction.
These amounts, together with the elimination of intercompany costs
discussed in Note (d) above, results in adjustments to cost of purchased
transportation and services of $32,376, $8,544 and $34,609 for the fiscal
year ended December 25, 1998, the three months ended April 2, 1999 and the
twelve months ended April 2, 1999, respectively.
(f) Reflects the adjustment to lease expense and depreciation as a result of
the sale and leaseback transaction completed in connection with our
recapitalization and the Pacer Logistics transaction:
<TABLE>
<CAPTION>
Twelve Months
Fiscal Year Ended Three Months Ended
December 25, Ended April 2, April 2,
1998 1999 1999
----------------- -------------- -------------
<S> <C> <C> <C>
Elimination of historical
railcar depreciation
expense.................... $ (973) $(358) $(1,269)
Lease expense associated
with the sale and leaseback
transaction................ 3,500 875 3,500
------ ----- -------
$2,527 $ 517 $ 2,231
====== ===== =======
</TABLE>
42
<PAGE>
(g) Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Twelve Months
December 25, Ended April 2, Ended April 2,
1998 1999 1999
----------------- -------------- --------------
<S> <C> <C> <C>
Elimination of historical
information technology
expenses allocated to
Pacer International by APL
Limited................... $(7,300) $(2,000) $(7,300)
Cost to outsource
information technology
services in accordance
with the Information
Technology Outsourcing and
License Agreement......... 10,000 2,500 10,000
------- ------- -------
$ 2,700 $ 500 $ 2,700
======= ======= =======
Incremental management fee
charged to Pacer
International by Apollo
Management in accordance
with the new management
agreement................. $ 375 $ 94 $ 375
======= ======= =======
(h) Reflects the following:
Elimination of Pacer
Logistics historical
goodwill amortization..... $(1,334) $ (474) $(1,590)
Elimination of Pacer
Logistics 1998 and 1999
completed acquisition
goodwill amortization..... (746) (54) (493)
Estimated goodwill
amortization as if the
Pacer Logistics
acquisition had occurred
on January 1, 1998,
amortized over forty years
.......................... 3,096 774 3,096
------- ------- -------
$ 1,016 $ 246 $ 1,013
======= ======= =======
(i) Reflects the following:
Elimination of historical
Pacer Logistics interest
expense and the
amortization of debt
issuance costs related to
debt to be repaid in
connection with the Pacer
Logistics transaction..... $(2,867) $(1,126) $(3,427)
Elimination of pro forma
Pacer Logistics interest
expense................... (1,879) (168) (1,412)
Interest expense resulting
from our $135 million term
loan at an assumed
interest rate of 8%....... 10,800 2,700 10,800
Interest expense resulting
from the $150 million
notes at an interest rate
of 11 3/4%................ 17,625 4,406 17,625
Amortization of debt
issuance costs of $8.2
million associated with
our senior credit
facilities and the notes
over the life of the
related debt.............. 1,650 413 1,650
------- ------- -------
$25,329 $ 6,225 $25,236
======= ======= =======
</TABLE>
(j) Reflects the following:
(k) Reflects the adjustment to the provision for income taxes which Pacer
International would have recorded (based on Pacer International's tax rate)
had the transactions occurred on January 1, 1998. Note that Pacer
International's income taxes payable will be offset by the $85,000 deferred
tax asset arising as a result of the Section 338(h)(10) election. This will
reduce cash payments for income taxes over the next fifteen years.
43
<PAGE>
(l) In connection with our recapitalization and the Pacer Logistics
transaction, certain members of management received Pacer Logistics
Exchangeable Preferred Stock calling for an annual 7.5% paid-in-kind
dividend. The amount represents the annual dividend, based on preferred
stock value of Pacer Logistics of $24,300 at 7.5%. Amount for the three
months ended April 2, 1999 represents one fourth of the annual charge.
(m) EBITDA represents income before income taxes, interest expense,
depreciation and amortization and minority interest (payment-in-kind
dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is
presented because it is commonly used by certain investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flows or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity. Pro
forma EBITDA is calculated as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Twelve Months
December 25, Ended April 2, Ended April 2,
1998 1999 1999
----------------- -------------- --------------
<S> <C> <C> <C>
Pacer International
historical EBITDA......... $39,800 $ 9,400 $42,000
Pacer Logistics historical
EBITDA.................... 12,356 4,460 14,091
Pacer Logistics completed
1998 and 1999 acquisitions
EBITDA.................... 4,661 444 2,937
EBITDA associated with Pro
forma Adjustments......... 8,025 2,181 8,025
------- ------- -------
Pacer International Pro
forma EBITDA.............. $64,842 $16,485 $67,053
======= ======= =======
(n) Adjusted EBITDA represents pro forma EBITDA, adjusted as follows:
<CAPTION>
Fiscal Year Ended Three Months Twelve Months
December 25, Ended April 2, Ended April 2,
1998 1999 1999
----------------- -------------- --------------
<S> <C> <C> <C>
Pro forma EBITDA........... $64,842 $16,485 $67,053
Adjustments to pro forma
EBITDA:
Elimination of allocated
corporate costs, less
estimated stand alone
costs (1)............... 2,915 904 3,015
Elimination of historical
Pacer Logistics initial
public offering
costs (2)............... 1,500 -- 1,500
Elimination of historical
Manufacturers
Consolidation Service,
Inc. initial public
offering costs (3)...... 625 -- 625
------- ------- -------
Adjusted EBITDA............ $69,882 $17,389 $72,193
======= ======= =======
</TABLE>
--------
(1) Reflects the elimination of historical corporate overhead costs
allocated to Pacer International by APL Limited, less $2,785 of
estimated annual actual costs expected to be incurred by Pacer
International to perform the services as a stand alone entity. The
estimated annual stand alone costs consists of salaries and benefits of
$1,650, outside services and consulting of $650 and additional rent of
$485.
(2) Pacer Logistics incurred non-recurring costs related to an expected
initial public offering in 1998.
(3) Manufacturers Consolidation Service is a wholly owned subsidiary of
Pacer Logistics. Manufacturers Consolidation Service incurred $625 of
non-recurring costs related to an expected initial public offering
prior to its acquisition by Pacer Logistics in 1998.
44
<PAGE>
(o) On April 20, 1999, Pacer Logistics acquired certain assets of the Keystone
companies and as part of the acquisition of the Manufacturers Consolidation
Service companies in December 1998, Pacer Logistics initiated a plan of
employee reductions resulting in annual cost savings of $900. To reflect
the pro forma effect of this acquisition and cost reductions on Pacer
Logistics' operations, the schedule below presents the unaudited historical
statement of operations of the Keystone companies, for the three month
period ended April 2, 1999, along with applicable pro forma adjustments for
the Keystone Terminals acquisition and the impact of cost savings from the
Manufacturers Consolidation Service companies' employee reductions.
<TABLE>
<CAPTION>
Completed
Pro Forma 1999
Keystone Adjustments Acquisition
-------- ----------- -----------
<S> <C> <C> <C>
Gross revenues........................ $5,297 $5,297
Cost of revenues...................... 4,556 4,556
------ ----- ------
Net revenues........................ 741 -- 741
Operating expenses:
Selling, general and administrative
expenses........................... 455 $(153)(1)(2) 302
Amortization........................ -- 54 (3) 54
------ ----- ------
Total operating expenses.............. 455 (99) 356
------ ----- ------
Income from operations.............. 286 99 385
Interest income/(expense)............. 44 (168)(4) (124)
------ ----- ------
Income before income taxes.......... 330 (69) 261
Income taxes.......................... -- 107 (5) 107
------ ----- ------
Income before extraordinary loss.... $ 330 $(176) $ 154
====== ===== ======
EBITDA................................ $ 291 $ 444
</TABLE>
--------
(1) As part of the Keystone Terminals acquisition in April 1999 the former
owners' salaries and benefits of $78 were eliminated. The adjustment
represents the elimination of the former owners' salary and benefits.
(2) The adjustment represents the elimination of Manufacturers
Consolidation Service salaries and benefits of $75 representing one
month of the $900 annual cost savings not included in historical
results, as the reductions were made in February 1999.
(3) Reflects the following:
<TABLE>
<CAPTION>
Three Months
Ended April 2,
1999
--------------
<S> <C>
Goodwill amortization if the Keystone Terminals acquisition
occurred on January 1, 1999............................... $ 54
(4) Reflects the following:
Interest expense that Pacer Logistics would have incurred
had the Keystone Terminals acquisition occurred on January
1, 1999, based on Pacer Logistics' historical average
interest rate of 8.16% for the three month period ending
April 2, 1999............................................. $168
</TABLE>
(5) Reflects the adjustment to the provision for income taxes which Pacer
Logistics would have recorded (based on Pacer Logistics' tax rate) had
the completed 1998 and 1999 acquisitions occurred on January 1, 1998
and includes an increase in tax provision for the Keystone companies,
which were previously taxed as Subchapter S corporations.
45
<PAGE>
(p) During 1998, Pacer Logistics acquired Intraco, the Cross Con companies,
Professional Logistics and the Manufacturers Consolidation Service
companies and during 1999, Pacer Logistics acquired the Keystone companies.
The schedule below presents the unaudited historical combined results of
operations of the acquired businesses for the periods from April 1, 1998
until their respective acquisitions by Pacer Logistics. Specifically,
Intraco, the Cross Con companies, Professional Logistics, the Manufacturers
Consolidation Service companies were acquired on April 3, 1998, June 6,
1998, July 26, 1998, December 10, 1998, respectively, and the Keystone
companies on April 20, 1999. (The pro forma results of Intraco for the
first two days of April were not included in the schedule below as they
were not deemed material for presentation.)
<TABLE>
<CAPTION>
Completed
Cross Professional Pro Forma 1998 & 1999
Con Logistics MCS(1) Keystone Adjustments Acquisitions
------- ------------ -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $10,258 $5,986 $ 70,674 $23,991 $ -- $110,909
Cost of purchased
transportation
and services........... 9,105 4,352 62,904 20,404 96,765
------- ------ -------- ------- ------- --------
Net revenues........... 1,153 1,634 7,770 3,587 -- 14,144
Operating expenses:
Direct operating
expenses.............. -- -- -- -- -- --
Selling, general and
administrative
expenses.............. 720 1,408 8,479 2,294 (2,084)(2)(3) 10,817
Amortization........... -- -- 65 -- 428 (4) 493
Other income expenses.. -- -- -- -- -- --
Transaction costs...... -- -- 625 -- -- 625
------- ------ -------- ------- ------- --------
Total operating
expenses............... 720 1,408 9,169 2,294 (1,656) 11,935
------- ------ -------- ------- ------- --------
Income from
operations............ 433 226 (1,399) 1,293 1,656 2,209
Interest
income/(expense)....... 13 (93) (549) 160 (938)(5) (1,407)
------- ------ -------- ------- ------- --------
Income before income
taxes................. 446 133 (1,948) 1,453 718 802
Income taxes ........... -- 2 (732) -- 1,116 (6) 386
------- ------ -------- ------- ------- --------
Income before
extraordinary loss.... $ 446 $ 131 $ (1,216) $ 1,453 $ (398) $ 416
======= ====== ======== ======= ======= ========
EBITDA.................. $ 442 $ 245 $ (805) $ 1,329 $ 1,726 $ 2,937
</TABLE>
--------
(1) As part of the acquisition of the Manufacturers Consolidation Service
companies in December 1998, Pacer Logistics elected to exit such
Manufacturers Consolidation Service companies' over the road trucking
business. The divestiture of this business segment was completed in
February 1999. Over the road trucking gross revenues, cost of purchased
transportation and services, selling, general and administrative
expenses, interest expense, income taxes and EBITDA of $6,082, $5,434,
$882, $84, $124 and $124, respectively, have been appropriately
excluded from the Manufacturers Consolidation Services companies'
results of operations presented.
(2) As part of the acquisition of the Manufacturers Consolidation Service
companies' in December 1998, Pacer Logistics initiated a plan of
employee reductions, resulting in annual cost savings of $900. The
reductions were made effective February 1999 and the $744 adjustment
reflects the 10 months of cost savings not recognized in the historical
statement of operations.
(3) As part of the acquisitions of the Cross Con companies, the
Manufacturers Consolidation Service companies' and the Keystone
companies acquisitions in June and December 1998 and April 1999,
respectively, the former owners' annual salaries and benefits were
reduced by $7, $596 and $737, respectively, aggregating $1,340.
(4) Reflects the elimination of historical goodwill amortization included
in completed 1998 and 1999 acquisition financial statements of $65 and
goodwill amortization, as if the completed 1998 and 1999 acquisitions
had occurred on April 1, 1998, of $493. This results in a net
adjustment of $428.
(5) Reflects the elimination of historical interest expense relating to
assumed debt paid off at the closing of the acquisitions of $474 and
interest expense that Pacer Logistics would have incurred had the
completed 1998 and 1999 acquisitions occurred on April 1, 1998 based on
Pacer Logistics' historical average interest rate of 8.07% for the
twelve month period ended March 31, 1999 of $1,412. This results in a
net adjustment of $938.
(6) Reflects the adjustment to the provision for income taxes which Pacer
Logistics would have recorded (based on Pacer Logistics' tax rate) had
the completed 1998 and 1999 acquisitions occurred on April 1, 1998. The
adjustment includes an increase in the tax provision for the Cross Con
companies and the Keystone companies, which were previously taxed as
Subchapter S Corporations.
46
<PAGE>
(q) For uniformity of presentation, certain financial statement captions have
been retitled and certain amounts reclassified to conform with retitled
financial statement captions.
<TABLE>
<CAPTION>
Pacer Logistics, Inc.
------------------------------
Three Twelve
Fiscal Months Months
Year Ended Ended Ended
December March 31, March 31,
25, 1998 1999 1999
---------- --------- ---------
<S> <C> <C> <C>
Direct operating expenses:
Reclassified depreciation from depreciation
and amortization............................. $ 329 $ 103 $ 385
======= ======= =======
Selling, general and administrative expenses:
Selling, general and administrative expenses
from historical information.................. $27,684 $10,268 $32,318
Reclassified depreciation from depreciation
and amortization............................. 370 187 481
------- ------- -------
$28,054 $10,455 $32,799
======= ======= =======
Amortization:
Depreciation and amortization from historical
financial information........................ $ 2,033 $ 764 $ 2,456
Less: Reclassified depreciation to direct
operating expenses........................... (329) (103) (385)
Less: Reclassified depreciation to selling,
general and administrative expenses.......... (370) (187) (481)
------- ------- -------
$ 1,334 $ 474 $ 1,590
======= ======= =======
</TABLE>
47
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Pacer International, Inc.
The following table presents, as of the dates and for the periods indicated,
(1) selected historical financial information and (2) selected pro forma
consolidated financial information, in each case after giving effect to our
recapitalization and the Pacer Logistics transaction. The selected historical
data for the fiscal years ended December 25, 1998 and December 27, 1996 and the
periods from December 28, 1996 to November 12, 1997 and November 13, 1997 to
December 26, 1997 have been derived from, and should be read in conjunction
with, the audited financial statements (including the notes thereto) of Pacer
International appearing elsewhere in this prospectus.
Prior to November 1998, Pacer International operated as the American
President Lines Stacktrain Services division of APL Land Transport Services,
Inc. (See Note 1 to the audited financial statements referred to above.) These
historical financial statements subsequent to November 13, 1997 include the
push down effect of the purchase price allocation resulting from the purchase
of APL Limited by Neptune Orient Lines Limited. The results of operations of
the predecessor period are not comparable to the successor period as a result
of the acquisition of APL Limited by Neptune Orient Lines Limited.
The selected historical financial data as of April 2, 1999 and for the three
months ended April 3, 1998 and April 2, 1999 have been derived from Pacer
International's unaudited financial statements and include, in the opinion of
our management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the data for such periods. The
unaudited pro forma balance sheet data reflects the financial position of our
business as if our recapitalization and the Pacer Logistics transaction, using
the purchase method of accounting for the Pacer Logistics transaction, had
occurred as of April 2, 1999. The unaudited pro forma statement of operations
and related information reflects our recapitalization and the Pacer Logistics
transaction as if they had occurred at the beginning of the relevant period.
The pro forma adjustments were applied to the historical financial statements
to reflect and account for our recapitalization and the Pacer Logistics
transaction as such and, accordingly, do not affect the historical basis of our
assets and liabilities.
The pro forma financial information does not purport to represent what our
financial position or results of operations would have actually been had our
recapitalization and the Pacer Logistics transaction in fact occurred on the
assumed dates or to project our financial position or results of operations for
any future date or period. The following table should also be read in
conjunction with "Unaudited Pro Forma Consolidated Financial Information" and
the related notes thereto and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations."
48
<PAGE>
<TABLE>
<CAPTION>
The Predecessor (a)
-------------------------
For the
Fiscal
<CAPTION> Year For the
Ended PerThe Companyiod Pro Forma Pacer International
------------------------------------------------- ------------------------------------
(in millions, except ratios and statistical data)
For the For the For the
Fiscal For the Three Twelve
For the Year For The Three Fiscal Year Months Months
Period Ended Months Ended Ended Ended Ended
------------ ------------ ----------------------- ------------ ----------- -----------
December 28,
1996 to
December 27, November 12,
1996 1997(b)
------------ ------------
Statement of
Operations
Data(c):
<S> <C> <C>
Gross revenues.. $548.0 $517.1
Cost of
purchased
transportation
and services... 423.7 407.5
Net revenues.... 124.3 109.6
Direct operating
expenses....... 37.4 49.4
Selling, general
and
administrative
expenses....... 25.6 24.0
Income from
operations..... 61.5 38.8
Income before
extraordinary
loss........... 38.1 22.9
Other Financial
Data:
EBITDA(d)....... $ 65.6 $ 41.8
EBITDA
margin(e)...... 52.8% 38.1%
Adjusted
EBITDA(f)......
Adjusted EBITDA
margin(e)......
Depreciation ... $ 4.1 $ 3.0
Amortization.... -- --
Capital
Expenditures(g).. 0.2 --
Cash interest
expense(h)..... -- 2.0
Debt to Adjusted
EBITDA.........
Adjusted EBITDA
to cash
interest
expense........
Ratio of
earnings to
fixed
charges(i)..... 6.2x 3.6x
Balance Sheet
Data (at period
end):
Total
assets(j)...... $ 71.4 --
Total debt
including
capital
leases......... -- --
Minority
interest-
exchangeable
preferred
stock.......... -- --
November 13,
1997 to
December 26, December 25, April 3, April 2, December 25, April 2, April 2,
1997(b) 1998 1998 1999 1998 1999 1999
------------ ------------ ----------- ----------- ------------ ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Statement of
Operations
Data(c):
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues.. $ 60.0 $590.8 $150.2 $163.6 $981.6 $253.9 $987.4
Cost of
purchased
transportation
and services... 47.4 466.3 119.6 129.8 780.4 201.0 783.0
Net revenues.... 12.6 124.5 30.6 33.8 201.2 52.9 204.4
Direct operating
expenses....... 7.4 62.4 17.2 18.1 65.3 18.7 65.9
Selling, general
and
administrative
expenses....... 3.2 29.0 7.8 8.0 75.8 19.4 75.9
Income from
operations..... 2.0 33.2 5.5 7.6 55.0 14.0 57.4
Income before
extraordinary
loss........... 1.0 20.6 3.5 4.8 13.3 3.5 14.8
Other Financial
Data:
EBITDA(d)....... $ 2.7 $ 39.8 $ 7.2 $ 9.4 $ 64.8 $ 16.5 $ 67.1
EBITDA
margin(e)...... 21.4% 32.0% 23.5% 27.8% 32.2% 31.2% 32.8%
Adjusted
EBITDA(f)...... $ 69.9 $ 17.4 $ 72.2
Adjusted EBITDA
margin(e)...... 34.7% 32.9% 35.3%
Depreciation ... $ 0.7 $ 6.0 $ 1.7 $ 1.7 $ 6.1 $ 1.6 $ 5.9
Amortization.... -- 0.6 0.1 0.1 3.7 0.9 3.7
Capital
Expenditures(g).. -- 39.7 16.3 -- 1.7 0.4 1.7
Cash interest
expense(h)..... 0.3 -- -- -- 28.5 7.1 28.4
Debt to Adjusted
EBITDA......... 3.9x
Adjusted EBITDA
to cash
interest
expense........ 2.5x 2.5x 2.5x
Ratio of
earnings to
fixed
charges(i)..... 1.8x 3.0x 2.3x 2.7x 1.5x 1.5x 1.5x
Balance Sheet
Data (at period
end):
Total
assets(j)...... $111.9 $156.1 $206.7 $170.7 $398.2 $398.2
Total debt
including
capital
leases......... -- -- -- -- 285.0 285.0
Minority
interest-
exchangeable
preferred
stock.......... -- -- -- -- 24.3 24.3
</TABLE>
- --------
(a) The financial statements subsequent to November 13, 1997 include the
accounts of Pacer International and include the "push down" effect of the
purchase price allocation. Prior to November 12, 1997, the financial
statements include the accounts of the Stacktrain Services division of APL
Land Transport Services. The results of operations of the predecessor
period are not comparable to the successor period as a result of the
acquisition of APL Limited by Neptune Orient Lines Limited.
49
<PAGE>
(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.
<TABLE>
<CAPTION>
1997
------
<S> <C>
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%
</TABLE>
(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.
<TABLE>
<CAPTION>
The Predecessor The Company
------------------------- ----------------------------------------------------------
For the For the
Fiscal Fiscal
Year For the For the Year For the Three
Ended Period Period Ended Months Ended
------------ ------------ ------------ --------------------- -----------------------
December 28, November 13,
1996 to 1997 to
December 27, November 12, December 26, December 25, April 3, April 2,
1996 1997 1997 1997(b) 1998 1998 1999
------------ ------------ ------------ ------- ------------ ----------- -----------
(unaudited) (unaudited)
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues:
Freight revenue........ $526.6 $498.4 $57.7 $556.1 $566.1 $143.9 $156.9
Avoided repositioning.. 15.7 15.8 1.9 17.7 20.0 5.0 5.5
Other revenue.......... 5.7 2.9 0.4 3.3 4.7 1.3 1.2
------ ------ ----- ------ ------ ------ ------
548.0 517.1 60.0 577.1 590.8 150.2 163.6
Cost of purchased
transportation and
services:
Rail linehaul.......... 401.3 383.7 43.8 427.5 438.1 113.5 122.1
Trucks & other......... 7.2 10.1 1.2 11.3 11.0 2.7 3.1
Empty repositioning.... 13.2 11.0 2.0 13.0 13.2 2.3 3.6
Terminal and cargo
handling, variable.... 2.0 2.7 0.4 3.1 4.0 1.1 1.0
------ ------ ----- ------ ------ ------ ------
423.7 407.5 47.4 454.9 466.3 119.6 129.8
------ ------ ----- ------ ------ ------ ------
Net revenues............ 124.3 109.6 12.6 122.2 124.5 30.6 33.8
Direct operating
expenses:
Terminal and cargo
handling, fixed....... 0.6 1.5 0.3 1.8 1.7 0.4 0.5
Equipment maintenance
and repair............ 15.1 14.6 1.8 16.4 18.3 4.8 5.2
Other variable
(income)/expense...... (16.7) (6.7) (0.7) (7.4) (13.1) (2.9) (2.6)
Fixed equipment
Rail cars.............. 3.4 3.3 0.5 3.8 6.5 2.0 1.4
Containers/chassis..... 31.6 33.5 4.9 38.4 44.9 11.6 12.7
Other.................. 3.4 3.2 0.6 3.8 4.1 1.3 0.9
------ ------ ----- ------ ------ ------ ------
37.4 49.4 7.4 56.8 62.4 17.2 18.1
Selling, general and
administrative
expenses:
Direct expenses........ 15.2 13.0 1.8 14.8 15.7 4.2 4.3
Other overhead......... 0.1 0.1 -- 0.1 0.9 0.2 0.2
Corporate
headquarters.......... 6.1 4.2 0.5 4.7 5.7 1.5 1.6
IT systems............. 4.2 6.7 0.9 7.6 7.3 2.0 2.0
Less reclassification
to amortization....... -- -- -- -- (0.6) (0.1) (0.1)
------ ------ ----- ------ ------ ------ ------
25.6 24.0 3.2 27.2 29.0 7.8 8.0
Amortization............ -- -- -- -- 0.6 0.1 0.1
Other (income)/expense.. (0.2) (2.6) -- (2.6) (0.7) -- --
------ ------ ----- ------ ------ ------ ------
Income from
operations........... 61.5 38.8 2.0 40.8 33.2 5.5 7.6
Interest
income/(expense)....... -- (2.0) (0.3) (2.3) -- -- --
------ ------ ----- ------ ------ ------ ------
Income before income
taxes................ 61.5 36.8 1.7 38.5 33.2 5.5 7.6
Income taxes(1)......... (23.4) (13.9) (0.7) (14.6) (12.6) (2.0) (2.8)
------ ------ ----- ------ ------ ------ ------
Net income............ $ 38.1 $ 22.9 $ 1.0 $ 23.9 $ 20.6 $ 3.5 $ 4.8
====== ====== ===== ====== ====== ====== ======
</TABLE>
50
<PAGE>
- --------
(1) Historically, Pacer International's operating results were included in
the consolidated incomes tax returns of APL Limited. A charge in lieu of
income taxes has been provided as if Pacer International were a separate
taxpayer.
(d) EBITDA represents income before income taxes, interest expense,
depreciation and amortization and minority interest (payment-in-kind
dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is
presented because it is commonly used by certain investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flows or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
(e) EBITDA and Adjusted EBITDA margins are calculated as a percentage of net
revenues.
(f) Adjusted EBITDA represents pro forma EBITDA, adjusted as follows:
<TABLE>
<CAPTION>
Year Ended Three Months Twelve Months
December 31, Ended April 2, Ended April 2,
1998 1999 1999
------------ -------------- --------------
<S> <C> <C> <C>
Pro forma EBITDA................ $64,842 $16,485 $67,053
Adjustments to pro forma EBITDA:
Elimination of allocated
corporate costs, less
estimated stand alone
costs(1)...................... 2,915 904 3,015
Elimination of historical Pacer
Logistics initial public
offering costs(2)............. 1,500 -- 1,500
Elimination of historical
Manufacturers Consolidation
Service, Inc. initial public
offering costs(3)............. 625 -- 625
------- ------- -------
Adjusted EBITDA................. $69,882 $17,389 $72,193
======= ======= =======
</TABLE>
--------
(1) Reflects the elimination of historical corporate overhead costs
allocated to Pacer International by APL Limited, less $2,785 of
estimated actual costs expected to be incurred by Pacer International
to perform the services as a stand alone entity. The estimated annual
stand alone costs consists of salaries and benefits of $1,650, outside
services and consulting fees of $650 and additional rent of $485.
(2) Pacer Logistics incurred $1,500 of non-recurring costs related to an
expected initial public offering in 1998.
(3) Manufacturers Consolidation Service is a wholly owned subsidiary of
Pacer Logistics. Manufacturers Consolidation Service, incurred $625 of
non-recurring costs related to an expected initial public offering
prior to its acquisition by Pacer Logistics in 1998.
(g) In 1998, Pacer International purchased $39.7 million of railroad cars of
which $23.4 million of expenditures were included in the twelve months
ended April 2, 1999. In connection with our recapitalization and the Pacer
Logistics transaction, we completed a sale and leaseback transaction for
these railcars. Therefore, on a pro forma basis, the capital expenditure
related to these railcars has been eliminated and direct operating expenses
has been increased by $2.5 million and $2.2 million for the year ended
December 25, 1998 and the twelve months ended April 2, 1999, respectively,
to reflect the net impact on operating results of the additional lease
expense less historical depreciation on these railcars.
(h) Cash interest expense represents interest expense less amortization of debt
issuance costs.
(i) For purposes of the computation, the ratio of earnings to fixed charges has
been calculated by dividing (i) income before income taxes plus fixed
charges by (ii) fixed charges. Fixed charges are defined as interest
expense plus the estimated interest portion of rent expense (assumed to be
one-third of rent expense).
(j) Total assets at April 3, 1998 were significantly higher as compared to
December 25, 1998 and April 2, 1999 due to the timing of settlement of an
intercompany receivable with APL Limited.
51
<PAGE>
Pacer Logistics, Inc.
The following table presents as of the dates and for the periods indicated
(i) selected historical consolidated financial information and (ii) summary pro
forma consolidated financial information, in each case after giving effect to
our recapitalization and the Pacer Logistics transaction. The selected
historical data for the years ended December 31, 1998, 1996, 1995 and the
periods January 1, 1997 to March 31, 1997 and March 31, 1997 to December 31,
1997 have been derived from and should be read in conjunction with, the audited
financial statements (including the notes thereto) of Pacer Logistics appearing
in this prospectus.
The financial data as of December 31, 1995 and 1994 and March 31, 1999 and
for the year ended December 31, 1994 and for the three months ended March 31,
1999 and 1998 have been derived from Pacer Logistics' unaudited financial
statements and include, in the opinion of our management, all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the data for such periods. The results of operations for the three months ended
March 31, 1999 are not necessarily indicative of the results that can be
expected for the entire year. Prior to March 31, 1997, Pacer Logistics was an
operating division of the Union Pacific Railroad Company, and therefore is not
comparable in all respects to the periods subsequent to March 31, 1997.
The unaudited pro forma statement of operations and related information
reflects our recapitalization and the Pacer Logistics transaction as if they
had occurred at the beginning of the relevant period and excludes certain
nonrecurring items directly attributable to our recapitalization and the Pacer
Logistics transaction. The pro forma adjustments were applied to the historical
financial statements to reflect and account for our recapitalization and the
Pacer Logistics transaction. The pro forma financial information does not
purport to represent what Pacer Logistics' financial position or results of
operations would have actually been had our recapitalization and the Pacer
Logistics transaction in fact occurred on the assumed dates or to project Pacer
Logistics' financial position or results of operations for any future date or
period. The following table should also be read in conjunction with "Unaudited
Pro Forma Consolidated Financial Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Pacer Logistics Historical
----------------------------------------------------------------------------------
The Predecessor (a) The Company (a)
------------------------------------ ---------------------------------------------
<CAPTION>
Pro Forma (b)
------------------------------------
For the For the
For the Fiscal Years Period Period For the For the Three
Ended January 1, March 31, Fiscal Months Ended
------------------------ 1997 to 1997 to Year -----------------------
March 31, December 31, Ended March 31, March 31,
1994 1995 1996 1997 1997 1998 1998 1999
----------- ----- ----- ---------- ------------ ------- ----------- -----------
(unaudited) (unaudited) (unaudited)
(in millions, except ratios and statistical
data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations
Data (c):
Gross revenues.. $75.9 $78.3 $86.8 $19.5 $81.1 $252.8 $50.4 $ 89.9
Cost of
purchased
transportation
and services... 64.8 65.9 73.1 16.5 68.7 211.2 42.0 75.2
Net revenues.... 11.1 12.4 13.7 3.0 12.4 41.5 8.4 14.7
Income from
operations..... 3.7 3.6 3.5 0.2 3.2 10.3 2.4 3.7
Income before
extraordinary
loss........... 2.7 3.0 3.0 0.1 1.5 4.3 1.1 1.5
Other Financial
Data:
EBITDA (d)...... $ 3.9 $ 3.7 $ 3.6 $ 0.2 $ 3.6 $ 12.4 $ 2.7 $ 4.5
EBITDA margin
(e)............ 35.1% 29.8% 26.3% 6.7% 29.0% 29.9% 32.1% 30.6%
Adjusted EBITDA
(f)............
Adjusted EBITDA
margin (e).....
Depreciation.... $ 0.2 $ 0.1 $ 0.1 -- $ 0.1 $ 0.7 $ 0.1 $ 0.3
Amortization.... -- -- -- -- 0.3 1.3 0.2 0.5
Capital
expenditures... -- -- 0.2 0.1 0.4 1.7 0.4 0.4
Interest
expense........ -- -- -- -- 0.7 2.9 0.6 1.1
Adjusted EBITDA
to interest
expense........
Balance Sheet
Data
(at period
end):
Total assets
(g)............ $31.6 $32.3 $37.6 $11.4 $57.1 $113.9 $56.1 $111.1
Total debt and
capital
leases......... -- -- -- -- 26.9 53.3 24.6 50.4
For the For the
For the Three Twelve
Fiscal Year Months Months
Ended Ended Ended
------------ ----------- -----------
December 31, March 31, March 31,
1998 1999 1999
------------ ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Statement of
Operations
Data (c):
Gross revenues.. $408.6 $95.2 $403.2
Cost of
purchased
transportation
and services... 346.5 79.7 341.1
Net revenues.... 62.1 15.5 62.1
Income from
operations..... 13.9 4.1 13.8
Income before
extraordinary
loss........... 5.1 1.6 5.1
Other Financial
Data:
EBITDA (d)...... $ 17.0 $ 4.9 $ 17.0
EBITDA margin
(e)............ 27.4% 31.6% 27.4%
Adjusted EBITDA
(f)............ $ 19.1 $ 4.9 $ 19.1
Adjusted EBITDA
margin (e)..... 30.8% 31.6% 30.8%
Depreciation.... $ 1.1 $ 0.3 $ 1.1
Amortization.... 2.1 0.5 2.1
Capital
expenditures...
Interest
expense........ 4.8 1.3 4.8
Adjusted EBITDA
to interest
expense........ 4.0x 3.8x 4.0x
Balance Sheet
Data
(at period
end):
Total assets
(g)............
Total debt and
capital
leases.........
</TABLE>
52
<PAGE>
- -------
(a) The information set forth above as the Predecessor includes the accounts
of Pacific Motor Transport Company prior to the management buyout on March
31, 1997. Pacer Logistics includes the accounts of Pacific Motor Transport
Company acquired in the management buyout, after purchase accounting
adjustments, and the accounts of all acquisitions Pacer Logistics has made
subsequent to their acquisition date.
(b) The pro forma information gives effect to the acquisitions as if they were
completed on the first day of the periods presented. See "Unaudited
Consolidated Pro Forma Financial Information."
(c) The following information for the full year 1997 has been presented for
comparative purposes only and is the combination of the January 1, 1997 to
March 31, 1997 period and the March 31, 1997 to December 31, 1997 period.
As a result of the change in ownership of Pacer Logistics, these numbers
are not indicative of what the full year 1997 was or would have been, if
the changes in ownership had not occurred.
<TABLE>
<CAPTION>
1997
------
<S> <C>
Gross revenues........................ $100.6
Cost of purchased transportation and
services............................. 85.2
Net revenues.......................... 15.4
Income from operations................ 3.4
Income before extraordinary loss...... 1.6
EBITDA (d)............................ 3.8
EBITDA margin (e)..................... 24.7%
</TABLE>
(d) EBITDA represents income before income taxes, interest expense,
depreciation and amortization and minority interest (payment-in-kind
dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is
presented because it is commonly used by certain investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flows or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
(e) EBITDA and Adjusted EBITDA margins are calculated as a percentage of net
revenues.
(f) Adjusted EBITDA represents pro forma EBITDA, adjusted as follows:
<TABLE>
<CAPTION>
Three Twelve
Fiscal Year Months Months
Ended Ended Ended
December 31, March 31, March 31,
1998 1999 1999
------------ --------- ---------
<S> <C> <C> <C>
Pro forma EBITDA.......................... $17.0 $4.9 $17.0
Adjustments to pro forma EBITDA:
Elimination of historical Pacer Logistics
initial public offering costs (1)....... 1.5 -- 1.5
Elimination of historical Manufacturers
Consolidation Service, Inc. initial
public offering costs (2)............... 0.6 -- 0.6
----- ---- -----
Adjusted EBITDA........................... $19.1 $4.9 $19.1
===== ==== =====
</TABLE>
(1) Pacer Logistics incurred $1.5 million of non-recurring costs related
to an expected initial public offering in 1998.
(2) Manufacturers Consolidation Service is a wholly owned subsidiary of
Pacer Logistics. Manufacturers Consolidation Service incurred $0.6
million of non-recurring costs related to an expected initial public
offering prior to its acquisition by Pacer Logistics in 1998.
(g) The total assets of Pacer Logistics for the fiscal years ended 1994 and
1995 (prior to the change in ownership of Pacer Logistics) have been
derived from Pacer Logistics' unaudited consolidated financial statements.
53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations covers periods before the completion of our recapitalization and the
Pacer Logistics transaction. In connection with the recapitalization and the
Pacer Logistics transaction, we entered into financing arrangements and altered
our capital structure. The results of operations and financial condition for
the periods subsequent to the consummation of our recapitalization and the
Pacer Logistics transaction will not necessarily be comparable to prior
periods. The following should be read in conjunction with the "Unaudited Pro
Forma Consolidated Financial Information," "Selected Historical and Pro Forma
Consolidated Financial Information" and the audited financial statements and
notes thereto included elsewhere in this prospectus.
PACER INTERNATIONAL, INC.
Overview
Until November, 1998, APL Land Transport Services, Inc. was comprised of two
operating divisions: the Stacktrain Services Division and the Automotive
Division. Prior to May 1996, APL Land Transport Services, Inc. had a third
operating division, Distribution Services. Effective November 20, 1998, the
Automotive Division and remaining assets related to the 1996 sale of
Distribution Services were transferred to APL Limited. On November 12, 1997 APL
Limited was acquired by Neptune U.S.A., Inc., a Delaware corporation and an
indirect, wholly-owned subsidiary of Neptune Orient Lines Limited, a Singapore
corporation. In the acquisition, Neptune U.S.A., Inc. merged with and into APL
Limited. The resulting company, APL Limited, is a subsidiary of Neptune Orient
Lines Limited. The financial statements subsequent to November 12, 1997 include
the "push down' effect of the purchase price allocation. Prior to November 13,
1997, the financial statements include the accounts of the Stacktrain Services
division of APL Land Transport Services, Inc.
We are the largest provider of intermodal rail service in North America that
is not affiliated with a railroad company. We offer rail freight services by
selling intermodal service to shippers while buying space on intermodal rail
trains. Through long-term contracts and other operating arrangements with major
rail carriers and using our large fleet of leased and owned equipment, we have
access to a 50,000 mile North American rail network serving most major
population and commercial centers in the United States, Canada and Mexico. The
long-term operating arrangements with the rail carriers provide, among other
things, for favorable rates, guaranteed minimum service levels, priority
handling and the utilization of certain terminal facilities.
We directly market our stacktrain services primarily to intermodal marketers
which serve customers in various industries, including the automotive industry
and shippers of refrigerated freight. We also directly serve customers in the
ocean carrier industry. We provide rail transportation services to over 5,000
beneficial cargo owners. In addition, we have historically provided, and will
continue to provide, stacktrain and equipment repositioning services for
companies and operations that are affiliated with APL Limited.
The size of our equipment fleet, among other things, provides a significant
advantage in customer responsiveness and service reliability, which
distinguishes us from our competitors. We maintain an extensive fleet of owned
and leased railcars, containers and chassis, as follows:
<TABLE>
<CAPTION>
December 27, 1996 December 26, 1997 December 25, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Railcars.................. 372 364 559
Containers................ 13,270 17,917 19,737
Chassis................... 13,968 16,807 18,497
</TABLE>
54
<PAGE>
The fleet of containers presented above represent the 48 and 53 foot
containers and chassis intended specifically for the domestic market, which are
either owned or otherwise available to us through a combination of long- and
short-term leases. In addition, we have access to an extensive inventory of 20,
40 and 45 foot containers through a long-term container supply agreement with
APL Limited. In connection with our recapitalization, we entered into a long-
term sublet agreement with APL Limited giving us access to certain chassis to
be used in our ocean carrier market segment. We provide APL Limited with
equipment repositioning services through which we transport APL Limited's empty
containers from destinations within North America to their West Coast points of
origin. To the extent we are able to fill these empty containers with the
westbound freight of other stacktrain customers, we receive compensation from
both APL Limited for our repositioning service and from the other customers for
shipment of their freight. Reposition payments from APL Limited totaled $15.7
million, $17.7 million and $20.0 million in 1996, 1997 and 1998, respectively.
We expect to continue to increase the size of our domestic container fleet
through a mix of long- and short-term leases. In 1998, we purchased 200
railcars for $39.7 million. In connection with our recapitalization, we
completed a sale and leaseback transaction for all of the recently purchased
railcars. The pro forma impact from the additional lease expense resulting from
the sale and leaseback transaction is $3.5 million for the fiscal year ended
December 25, 1998, however, elimination of historical railcar depreciation
expense of $1.0 million for the same period partially offsets the additional
lease expense.
The overall freight rate environment in the rail and long haul truck
industry influences the freight rates we are able to charge customers. As a
user of the railroads' networks and facilities, our operating results and
quality of customer service are directly impacted by the service provided by
the railroads. The disruption of service in the U.S. railroad network beginning
in 1997 adversely impacted the levels of service we were able to provide to our
customers, as evidenced by the increase in average trip days of 16.0, 16.4 and
17.9 in 1996, 1997 and 1998, respectively. These operating issues resulted in
(1) the loss of certain premium business,
(2) price reductions on certain shipments to satisfy customer frustrations,
and
(3) less efficient utilization of our container fleet.
The loss of certain premium business, such as our expedited services and
refrigerated services negatively impacted both gross and net revenue as certain
shipments were shifted by customers to more costly, yet more reliable over-the-
road carriers. Despite the service disruption and delays, we were able to
continue to grow our volumes through this period. To minimize the disruption to
our customers, we added to our container fleet to ensure availability to
support increased volumes. Although volumes increased in 1997 by 41,680 or 9.1%
and in 1998 by 21,438 or 4.3%, the longer trip days negatively impacted
operating results as average revenue per container declined while lease expense
increased with the container fleet additions. The railroad service problems are
being resolved by the railroads and our management believes that the intermodal
industry will return to historical service levels, pricing and growth rates.
Prior to our recapitalization, we participated in APL Limited's cash
management plan through which our excess cash was advanced to APL Limited and
our cash needs were funded by APL Limited. In addition, APL Limited provided us
with information technology services for which we were allocated $4.2 million,
$7.6 million and $7.3 million of APL Limited's costs in 1996, 1997 and 1998,
respectively. We are in the process of negotiating a long-term agreement with
APL Limited to continue to provide similar information technology services to
us. According to a term sheet upon which such negotiations are based, the
information technology services would be provided to us for an annual fee of
$10.0 million. APL Limited also provided certain corporate administrative
services to us for which we were allocated $6.1 million, $4.7 million and $5.7
million of APL Limited's total corporate costs in 1996, 1997 and 1998,
respectively. We anticipate that the cost for similar administrative services
as a stand-alone entity will be approximately $2.8 million per year. We also
entered into an agreement with APL Limited to receive a $6.6 million management
fee for services in
55
<PAGE>
connection with the Stracktrain Services Agreement. We have also agreed with
APL Limited that certain administrative services will continue to be provided
by APL Limited on a per transaction basis for a transition period, expiring one
year from the closing of our recapitalization or earlier as determined by us.
As part of our recapitalization and the Pacer Logistics transaction, we reached
an agreement with a supplier, which effectively provides us with $8.0 million
in annual rate reductions. The cost savings and additional cost and income
items discussed in the paragraph above, excluding the savings achieved from the
elimination of allocated corporate overhead costs, net of estimated stand-alone
costs, have been reflected in the unaudited pro forma consolidated statement of
operations.
Gross Revenues
Our gross revenues are generated substantially through fees charged to
customers for the transportation of freight. The growth of these revenues is
primarily driven by increases in volume of freight shipped, as overall rates
have historically remained relatively constant. The average rate is impacted by
product mix, rail lanes utilized and market conditions. Also included in gross
revenues are incentives paid by APL Limited for the repositioning of empty
containers with domestic westbound loads. Reposition incentives growth is
driven by the increase in APL Limited's shipping volumes from Asia to key
population centers in North America, as well as our ability to fill APL
Limited's empty containers with the westbound freight of other stacktrain
customers. In addition, we will receive an annual management fee of $6.6
million for services in connection the Stacktrain Services Agreement.
Cost of Purchased Transportation and Services/Net Revenues
Our net revenues are the gross revenues less the costs of purchased
transportation and services. The cost of purchased transportation and services
consists primarily of the amounts charged by railroads and local trucking
companies. In addition, terminal and cargo handling services represent the
variable expenses directly associated with handling freight at a terminal
location. The cost of these services is variable in nature and is based on the
volume of freight shipped.
Direct Operating Expenses
Direct operating expenses are both fixed and variable expenses directly
relating to the stacktrain operations and consist of equipment lease and
depreciation expense, equipment maintenance and repair, fixed terminal and
cargo handling expenses and other direct variable expenses. Our fleet of leased
equipment is maintained through a variety of short- and long-term leases, many
of which can be terminated without penalty in an economic downturn. Increases
to our equipment fleet will primarily be through additional leases as the
growth of our business dictates. Equipment maintenance and repair consist of
the costs related to the upkeep of the equipment fleet, which can be considered
semi-variable in nature, as a certain amount relates to the annual preventative
maintenance costs in addition to amounts driven by fleet usage. Fixed terminal
and cargo handling costs primarily relate to the fixed rent and storage expense
charged to us by terminal operators and is expected to remain relatively fixed.
Other variable expenses primarily include income received from users of our
railcars in their operations, which has historically remained relatively
constant. Historically, also included in other variable expenses are service
credits from for-hire transportation providers, which effectively reduce our
transportation costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of allocated APL
Limited's corporate and information technology expenses and direct
administrative expenses, which primarily include payroll and fringe benefits
and other overhead expenses. We estimate that our recurring annual cost for
similar corporate administrative services, historically provided by APL
Limited, will be $2.8 million on a stand-alone basis. In addition, we are in
the process of negotiating a twenty-year agreement requiring APL Limited to
continue to provide information technology services. See "Certain Agreements."
56
<PAGE>
Results of Operations
The following table sets forth certain condensed historical financial data
for Pacer International, expressed as a percentage of net revenues for each of
the most recent fiscal years and for the two most recent fiscal first quarters.
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year 3 Months 3 Months
Ended Ended Ended Ended Ended
December 27, December 26, December 25, April 3, April 2,
1996 1997(2) 1998 1998 1999
------------ ------------ ------------ ------------ ------------
(in millions, except statistical data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $548.0 $577.1 $590.8 $150.2 $163.6
Cost of purchased
transportation and
services............... 423.7 454.9 466.3 119.6 129.8
------ ------ ------ ------ ------
Net revenues............ 124.3 100.0% 122.2 100.0% 124.5 100.0% 30.6 100.0% 33.8 100.0%
Expenses:
Direct operating
expenses.............. 37.4 30.1 56.8 46.5 62.4 50.1 17.2 56.2 18.1 53.6
Selling, general &
administrative
expenses.............. 25.6 20.6 27.2 22.3 29.0 23.3 7.8 25.5 8.0 23.7
Income from operations.. 61.5 49.5 40.8 33.4 33.2 26.7 5.5 18.0 7.6 22.5
Net income.............. 38.1 30.7 23.9 19.6 20.6 16.5 3.5 11.4 4.8 14.2
EBITDA(1)............... $ 65.6 52.8% $ 44.5 36.4% $ 39.8 32.0% $ 7.2 23.5% $ 9.4 27.8%
</TABLE>
- --------
(1) See Note (b) in "Summary Unaudited Pro Forma Consolidated Financial
Information" for the definition of EBITDA.
(2) The fiscal year ended December 26, 1997 presented in the table above
represents the combination of the accounts of the Stacktrain Services
division of APL Land Transport Services, Inc. for the period from December
28, 1996 through November 12, 1997 and Pacer International from November
13, 1997 though December 26, 1997 and is presented only for comparative
purposes. The results of operations of the predecessor period are not
comparable to successor period as a result of the acquisition of APL
Limited by Neptune Orient Lines Limited. This combination of the two fiscal
periods is not necessarily indicative of what the results of Pacer
International's operations would have been for the year.
Three Months Ended April 2, 1999 Compared to the Three Months Ended April 3,
1998
Gross Revenues. Gross revenues increased $13.4 million, or 8.9%, from $150.2
million in first quarter 1998 to $163.6 million in first quarter 1999. Freight
revenues accounted for $13.0 million of this growth with a 14,997, or 11.4%,
increase in year over year volumes, partially offset by a slight decrease in
the average rate per container primarily resulting from mix changes. Third-
party domestic and third-party international business contributed to the growth
with revenue increases of $8.4 million and $3.5 million, respectively, as a
result of increased volumes of 10.9% and 20.4%, respectively. The increase in
third party domestic volume is attributable to increased customer demand and to
the improvement in the average trip days in February and March 1999 of 17.2
days and 17.1 days, respectively, compared to 17.5 days and 18.4 days for the
same periods in 1998. Refrigerated Services business revenues declined by $1.0
million, or 49.6%, as a result of the loss of a large customer to over-the-road
carriers. Reposition incentive revenues increased $0.5 million quarter over
quarter as a result of increased APL Limited shipping volume and the continued
trade imbalance.
Net Revenues. Net revenues increased $3.2 million, or 10.5%, to $33.8
million or 20.7% of gross revenues in the first quarter 1999 from $30.6 million
or 20.4% of gross revenues in first quarter 1998. The increase is primarily a
result of the increased volumes discussed above. The increase in net revenues
as a percentage of gross revenues is attributable to the third party domestic
business, which benefited from a favorable mix in business as compared to the
prior year quarter.
Direct Operating Expenses. Direct operating expenses increased $0.9 million,
or 5.2%, from $17.2 million in first quarter of 1998 to $18.1 million in first
quarter 1999. As a result of the expansion of our extensive fleet of containers
and chassis, lease expense increased by $1.1 million. This was offset by a
reduction in railcar depreciation expense of $0.6 million due to a change in
the estimated useful life of our railcars, in addition to a $0.4 million
reduction in customer cargo claims.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million, or 2.6%, to $8.0 million in
1999 from $7.8 million in 1998.
Income from Operations. Operating income increased $2.1 million, or 38.2%,
from $5.5 million, or 18.0%, of net revenues in 1998 to $7.6 million or 22.5%
of net revenues due to the foregoing factors.
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Net Income. Net income increased $1.3 million, or 37.1%, from $3.5 million
in first quarter 1998 to $4.8 million in first quarter 1999, due to the
increase in operating income and the related increase in income taxes.
Year Ended December 25, 1998 Compared to the Year Ended December 26, 1997
The following discussion for the year ended December 26, 1997 has been
presented for comparative purposes only and is the combination of the
Stacktrain Services division of APL Land Transport Services, Inc. from December
28, 1996 to November 13, 1997 period and Pacer International from November 13,
1997 to December 26, 1997 period. As a result of the change in ownership of
Pacer International, these numbers may not be indicative of what the full year
1997 was or would have been if the ownership change had not occurred.
Gross Revenues. Gross revenues for 1998 increased $13.7 million to $590.8
million, or 2.4%, from $577.1 million in 1997. Freight revenues increased $10.0
million, or 1.8%, due to an increase in loads of 21,438, or 4.3%, offset by a
slight decrease per load in the average freight rate as a result of product mix
changes and the loss of certain premium business. The third-party domestic and
third-party international business contributed with revenue increases of $17.0
million and $3.7 million, respectively, as a result of increased volumes of
7.9% and 11.7%, respectively, partially attributable to the additional 2,000
53-foot containers which were leased during 1998, and the strong import market
positively impacting the third-party international business. The automotive and
reefer business revenues declined $10.6 million primarily as a result of the
rail service problems, as the reefer business is considered premium business
and time sensitive. The type of automotive business that declined was primarily
the time sensitive "Just-In-Time" business, which was lost to over-the-road
truck transporters. Historically, our rates have been impacted by the rail
service disruptions as certain expedited business, for which premium rates are
charged, has been shifted by customers to more costly, yet more reliable over-
the-road carriers. Reposition incentive revenues increased $2.3 million from
1997 to 1998 as a result of increased APL Limited shipping volume.
Net Revenues. Net revenues increased $2.3 million to $124.5 million in 1998
from $122.2 million in 1997, as a result of the increased revenues discussed
above. The net revenues as a percentage of gross revenues remained relatively
constant in 1998 at 21.1% compared to 21.2% in 1997.
Direct Operating Expenses. Direct operating costs increased $5.6 million, or
9.9%, to $62.4 million in 1998 from $56.8 million in 1997 due to increases in
equipment lease expense of $6.4 million, railcar depreciation expense of $1.8
million and allocated maintenance and repair charges of $1.9 million, offset by
a credit from a third-party transportation provider, to effectively reduce our
third-party transportation costs, of $5.0 million.
The additional lease expense primarily relates to the 2,000 additional 53-
foot containers we leased in 1998 compared to 1997, which were delivered at
various times throughout the year, with all of them in operation by the end of
1998. The additional containers were leased to fulfill customer demand during
the period of rail service disruption. This increase in containers negatively
impacted operating results as a result of the increased trip days combined with
a decline in average revenue per container as previously discussed. In
addition, we purchased 200 railcars in the first quarter of 1998 for $39.7
million, increasing depreciation expense in 1998. Historically, we were
allocated maintenance and repair charges from APL Limited, based on a formula
using the number of days the equipment was in use. The maintenance and repair
charges increased in 1998 due to the increased volume of shipments in 1998 and
the increased number of containers, railcars and chassis owned or leased by us
compared to 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.8 million, or 6.6%, in 1998 to $29.0
million compared to $27.2 million in 1997 primarily as a result of the total
corporate expenses allocated to us from APL Limited increasing $1.0 million,
and the increase in various direct selling, general and administrative
expenses.
Other Income and Expense. Other income decreased $1.9 million in 1998 to
$0.7 million from $2.6 million in 1997 primarily attributed to a gain on the
sale of certain operating equipment of $2.6 million in 1997 compared to a gain
on the sale of certain equipment of $0.4 million in 1998.
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Income From Operations. Operating income decreased $7.6 million in 1998 to
$33.2 million or 26.7% of net revenues from $40.8 million or 33.4% in 1997 due
to the foregoing factors.
Interest expense. Interest expense decreased $2.3 million to $0.0 in 1998
due to reduced intercompany borrowings from APL Limited in 1998.
Income taxes. Income taxes decreased $2.0 million in 1998 to $12.6 million
compared to $14.6 million in 1997, as a result of the decrease in income before
income taxes from 1997 to 1998.
Year Ended December 25, 1997 Compared to the Year Ended December 27, 1996
Gross Revenues. Gross revenues increased $29.1 million to $577.1 million in
1997 from $548.0 million in 1996, or 5.3%, as a result of a 9.1% increase in
container volume compared to 1996. Container volume increased by 41,680
containers to 501,523 in 1997 compared to 459,843 in 1996. The average revenue
per container decreased 2.8% in 1997, primarily as a result of losing certain
premium business to the trucking industry because of the railroad service
problems beginning in the last four months of 1997. Third-party domestic
business contributed to $5.4 million of the revenue increase as the volumes
increased 6.3% from 1996 levels and average per container rates declined 3.4%
due primarily to a shift in product mix and the loss of premium business. The
automotive business revenues increased $11.5 million as a result of a 10.1%
increase in container volume. Third-party-international business revenues
increased $11.0 million as a result of a 14.7% increase in volume, which is
attributed to the continued import volumes positively impacting the industry.
Net Revenues. Net revenues declined $2.1 million, or 1.7%, in 1997 to $122.2
million from $124.3 million in 1996, or 21.2%, of gross revenues in 1997
compared to 22.7% of gross revenues in 1996. The net revenues were negatively
impacted by higher transportation costs and a decrease in average rates per
container as discussed above. The higher transportation costs were attributable
to a shift in the shipping lanes utilized.
Direct Operating Expenses. Direct operating expenses increased $19.4
million, or 51.9%, in 1997 to $56.8 million from $37.4 million in 1996. The
increase is due to additional container and chassis lease expense of $8.8
million in 1997, an increase in allocated equipment maintenance and repair
expenses of $1.3 million and a decrease in service penalty income from the
railroads of $7.9 million.
The increased lease expense is associated with the additional containers and
chassis being leased in 1997. We had 27,479 container and chassis leased at
December 26, 1997 compared to 19,310 at December 27, 1996. The additional
containers were leased to fulfill customer demand during the period of rail
service disruption. This increase in containers negatively impacted operating
results as a result of the increased trip days combined with a decline in
average revenue per container as previously discussed. The increase in
equipment maintenance and repair expense is directly related to the increase in
the containers and chassis fleet in 1997. In 1996, we received a $7.9 million
credit from a transportation supplier for deficient service levels, as provided
for in the contract between us and the transportation supplier.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.6 million, or 6.3%, in 1997 to $27.2
million from $25.6 million in 1996. The increase is due to the total increase
in allocated corporate and information technology costs of $2.0 million to
$12.3 million from $10.3 million in 1996 which is primarily attributable to APL
Limited's implementation of a new information technology system, specifically
for us.
Other Income and Expense. Other income increased $2.4 million in 1997 to
$2.6 million in 1997 from $0.2 million in 1996 as a result of our recording a
$2.6 million gain on sale of certain operating equipment in 1997.
Income From Operations. Operating income declined $20.7 million, or 33.7%,
to $40.8 million, or 33.4%, of net revenues in 1997 from $61.5 million, or
49.5%, of net revenues in 1996 due to the foregoing factors.
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Interest Expense. Interest expense increased $2.3 million in 1997 from $0.0
in 1996 due to increased intercompany borrowings in 1997.
Income Taxes. Income taxes decreased $8.8 million or 37.6% in 1997 to $14.6
million from $23.4 million in 1996, as a result of the decrease in income
before income taxes in 1997 from 1996.
Liquidity and Capital Resources
Historical
Historically, we have used cash generated from operations for seasonal
working capital purposes, to fund capital expenditures and repay intercompany
debt. We generated net cash from operations of $17.4 million, $30.9 million and
$31.8 million in 1996, 1997 and 1998, respectively, and $(60.6) million and
$1.5 million in the first three months of 1998 and 1999, respectively. The
increase in net cash provided by operating activities from 1996 to 1997 is
attributable to a significant increase in accounts receivable in 1996 as a
result of the sale of APL Limited's retail intermodal marketing operations to a
third-party customer and therefore, the settlement timing of receivables was
impacted. Additionally, the $(60.6) million net use of operating cash is the
result of the timing of the settlement of intercompany receivables between APL
Limited and us.
Our excess cash from operations was historically remitted to our parent, APL
Limited through our participation in the APL Limited cash management plan. If
cash from operations were insufficient to fund capital expenditures, we
borrowed the required cash from APL Limited. Interest expense was charged to us
at a historical average borrowing rate for APL Limited. Net cash from
operations in 1996 and 1997 was remitted to APL Limited. We primarily lease our
fleet of operating equipment, however, capital expenditures have been
historically funded through net cash from operations or a combination of cash
from operations and intercompany borrowings. We purchased 200 railcars in 1998
for $39.7 million, of which $31.8 million was funded through operations and the
remaining amount was funded by APL Limited. In connection with our
recapitalization, we completed a sale and leaseback transaction for all the
recently purchased railcars. The net impact on pro forma operating results from
the additional lease expense, net of historical depreciation expense, as a
result of the sale and leaseback transaction is $2.5 million.
Post-Transactions
Following our recapitalization and the Pacer Logistics transaction, our
principal sources of liquidity are cash flow generated from combined operations
and borrowings under our $100.0 million revolving credit facility. Our
principal uses of capital are to meet debt service requirements, finance our
strategic acquisitions and provide working capital, as needed. We do not expect
to incur significant capital expenditures as additions to our equipment fleet
will be through a mixture of long- and short-term operating leases. We expect
that ongoing requirements for debt service, acquisitions and working capital
will be funded by internally generated cash flow from the combined operations
after the transactions and borrowings under our revolving credit facility.
We incurred substantial indebtedness in connection with our recapitalization
and the Pacer Logistics transaction. Following our recapitalization and the
Pacer Logistics transaction, on a pro forma basis, we had approximately $285.0
million of indebtedness. Our debt service obligations could have important
consequences to holders of the notes. See "Risk Factors."
In connection with our recapitalization and the Pacer Logistics transaction,
we entered into the Senior Credit Facilities, comprised of our $100.0 million
revolving credit facility expiring in 2004 and a Term Loan facility aggregating
$135.0 million, which matures in 2006. In general, the term loan and revolving
credit facility bear interest at variable rates subject to increases or
decreases based upon the achievement of certain financial ratios. Voluntary
prepayments and commitment reductions will generally be permitted without
premium or penalty, subject to certain conditions. Our credit facilities are
generally guaranteed by all of our existing and future direct and indirect
wholly-owned subsidiaries and are secured by certain liens on our properties
and assets. Our credit facilities are subject to customary representations,
warranties and covenants. See "Description of Our Credit Agreement."
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Based upon the current level of operations and anticipated growth, including
the Pacer Logistics operations and cash flow that management expects to be
derived from those operations. We believe that operating cash flow and
availability under our revolving credit facility will be adequate to meet our
liquidity needs for the foreseeable future, although no assurance can be given
in this regard.
In connection with our recapitalization and the Pacer Logistics transaction,
we incurred certain significant nonrecurring expenses (See "Unaudited Pro Forma
Consolidated Financial Information"). We incurred approximately $8.2 million
related to financing of our recapitalization and the Pacer Logistics
transactions and $15.9 million in estimated transaction fees and expenses as a
result of our recapitalization. Additionally, in connection with our
recapitalization, a Section 338(h)(10) election was made to allow our
recapitalization to be treated as an acquisition of assets for tax purposes.
Accordingly, the assets were stepped-up to their fair market value for tax
purposes. As a result, our income taxes payable will be offset by the $85.0
million deferred tax asset arising as a result of the step up. This will reduce
cash payments for income taxes over the next fifteen years.
Seasonality
Our business is seasonal, and our quarterly revenues and profits
historically have been lower during the first and second quarters of the year
(January through June) and higher during the third and fourth quarters (July
through December) due primarily to the retail industry's shipping requirements.
Environmental
We are subject to federal, state and local environmental regulations,
including regulations relating to permitting requirements, wastewater
discharges and underground storage tanks. We believe that we are in substantial
compliance with these requirements and that we currently have no material
environmental liabilities.
Year 2000
Pursuant to an IT Supplemental Agreement, dated as of May 11, 1999 by and
among APL Limited, Coyote Acquisition LLC and our company, we are currently
completing negotiations of an Information Technology Outsourcing and License
Agreement based upon a term sheet agreed by the parties. In accordance with the
sheet, APL Limited will provide us with all necessary software, licenses and
related services necessary to conduct the stacktrain business as it is
currently being conducted and as it is enhanced pursuant to and during the term
of the agreement. APL Limited will also be responsible for obtaining,
maintaining, upgrading and replacing any software, equipment, facilities or
personnel necessary in order to provide the services during the term of the
agreement. The term of such agreement will be twenty years.
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the Year 2000 as "00". This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. APL Limited, and thus Pacer International, utilizes software and related
computer technologies essential to its operations that could be affected by the
Year 2000 issue.
APL Limited has represented that it has devoted considerable personnel and
resources to a comprehensive Year 2000 project that addresses mission-critical
systems, infrastructure, vendors, suppliers and customers. Their goal is to
minimize, as much as possible, any detrimental impact that the Year 2000
problem may have upon their ability to serve their clients and provide the
services to us described in the Information Technology Outsourcing and
Licensing Agreement term sheet.
The fundamental approach of APL Limited is similar to those being employed
by many organizations. The four key phases of APL Limited's approach are
inventory assessment, remediation, testing and contingency planning.
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APL Limited has represented that the inventory assessment phase relating to
business systems and assets is virtually complete. APL Limited has further
represented that change-control processes have been established in an effort to
keep out non-compliant products or services and that appropriate language has
been incorporated into all standard contracts.
APL Limited has represented that the remediation phase of all critical
mainframe applications was completed prior to the end of March 1999. APL
Limited's Year 2000 project is also addressing other areas of the business
environment including both IT and non-IT systems. APL Limited has represented
that the remediation of all critical components was completed by the end of
June 1999. Testing is a critical part of APL Limited's plan and is being
conducted across all critical components utilizing comprehensive testing
methods. APL Limited has represented that integrated testing began during the
fourth quarter of 1998 and has targeted the third quarter of 1999 for
completion of critical elements testing.
The transportation industry is highly interconnected. Even after APL
Limited's systems are converted, and even with APL Limited's efforts to
coordinate Year 2000 solutions with third parties, APL Limited cannot be
certain that it will not encounter a Year 2000 related system malfunction.
Therefore, APL Limited has also represented that their Year 2000 program
includes making detailed contingency plans for a variety of potential problems,
ranging from information systems to vessel operations. Such plans can minimize,
not eliminate any adverse impact on the business.
The Information Technology Outsourcing and License Agreement term sheet
contains customary representations and warranties, including, that the
information technology, software, hardware and services being provided to us
constitute all such items required to provide the information technology
services necessary to run our business and relating to Year 2000 compliance of
the software and hardware used in providing the services under the agreement.
The term sheet also provides that APL Limited will indemnify us against
breaches of these representations, losses resulting from claims brought by
third parties alleging infringement of their intellectual property and losses
associated with a failure of the information technology systems to operate that
is either caused by APL Limited or covered by indemnification or warranties
provided to APL Limited by responsible third parties.
The Year 2000 problem also affects many of our major suppliers, including
railroads, and customers, and our business could be disrupted if any of them
fail to resolve their Year 2000 problems.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," modifying accounting and reporting standards for
derivative instruments. We do not expect the effect of implementation of this
standard to be significant.
The AICPA has issued Statements of Position 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." This statement
was adopted for financial statements for fiscal years beginning after December
15, 1998 and did not have a material effect on the financial statements.
In April 1998, the AcSEC issued Statement of Position 98-5 "Reporting on the
Costs of Start-Up Activities." This statement was adopted for financial
statements for fiscal years beginning after December 15, 1998 and did not have
a material effect on the financial statements.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information." Upon completion of the transactions, the Company will
apply the provisions of this statement as applicable.
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PACER LOGISTICS, INC.
Overview
Pacer Logistics' business consists primarily of
(1) intermodal marketing, which involves the provision of brokerage and
logistics services by coordinating the transportation of goods by truck and
rail,
(2) specialized trucking services, including flatbed heavy-haul trucking,
drayage and cartage, and
(3) other transportation services, such as freight consolidation and
handling.
As a non-asset-based service provider, Pacer Logistics is able to focus its
efforts on providing value-added logistics solutions for its customers through
its network of agents and independent contractors. Pacer Logistics primarily
provides services to numerous global, national and regional manufacturers and
retailers.
PMT Holdings, Inc., a Delaware corporation, was formed on March 31, 1997
(inception), to acquire all of the capital stock of Pacific Motor Transport
Company in a management buyout that was funded in part by Eos Partners, L.P. On
March 31, 1997, PMT Holdings acquired all issued and outstanding shares of
Pacific Motor Transport from Union Pacific Railroad Company and its
subsidiaries in exchange for approximately $13.0 million in cash and warrants
to purchase PMT Holdings common and preferred stock. Prior to the acquisition,
Pacific Motor Transport was a provider of truckload freight services and
intermodal marketing services. On December 16, 1997, PMT Holdings acquired all
of the capital stock of Interstate Consolidation, Inc. and Interstate
Consolidation Service, Inc. and its wholly owned subsidiary, Intermodal
Container Service, Inc. for total consideration of $25.4 million including
acquisition fees, consisting of $20.0 million in promissory notes and $5.4
million in cash and PMT Holdings stock. The Interstate companies are
multipurpose providers of transportation services, including intermodal
marketing, local trucking, and freight consolidation and handling. In May 1998,
PMT Holdings was renamed Pacer International, Inc. and its subsidiaries
reorganized. In connection with our recapitalization, Pacer International, Inc.
was renamed Pacer Logistics, Inc. The name change has been given retroactive
application in this discussion.
On April 3, 1998 Pacer Logistics acquired all the stock of Intraco, Inc. for
$1.9 million including acquisition fees, consisting of $0.5 million in cash and
$1.4 million in Pacer Logistics stock. On June 5, 1998, Pacer Logistics
acquired all of the capital stock of Cross Con Transport, Inc. and its
subsidiary, Cross Con Terminals, Inc., in exchange for $16.4 million including
acquisition fees, consisting of $11.6 million of cash and $4.8 million of Pacer
Logistics stock. On July 25, 1998, Pacer Logistics acquired substantially all
the assets of Professional Logistics Management Co., Inc. and 3PL Corporation,
in exchange for $2.9 million in cash, including acquisition fees. On December
9, 1998, Pacer Logistics acquired all of the capital stock of Manufacturers
Consolidation Service, Inc. and its subsidiaries, Levcon, Inc., MCS of Kansas,
Inc. and Manufacturers Consolidated Service of Canada Inc. for $10.1 million in
cash and assumed debt and acquisition fees. The Cross Con companies and the
Manufacturers Consolidation Service companies are multipurpose providers of
transportation services, including intermodal marketing and local trucking.
Professional Logistics and 3PL are providers of logistics services and Intraco
is involved in the transportation of equipment primarily for railroads. On
April 20, 1999, Pacer Logistics acquired substantially all of the assets of
Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) in exchange for
$8.25 million in cash. The Keystone companies are providers of transportation
services.
Gross Revenues
Pacer Logistics' gross revenues are generated through fees charged for a
broad portfolio of freight transportation services. Pacer Logistics' gross
revenues are generated from its intermodal marketing and flatbed and
specialized heavy-haul trucking services, augmented by local trucking, freight
consolidation and handling,
rail services and logistics outsourcing. Overall gross revenues for Pacer
Logistics will be driven through its ability to market its broad array of
transportation services to its existing customer base. Increases in gross
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revenues from intermodal marketing are generated primarily from increased
volumes, as rates are dependent upon product mix and transportation lane, which
tend to remain relatively constant as customers' shipments tend to remain in
similar lanes. The gross revenues from the flatbed and specialized heavy-haul
segment are driven by the volume, length of haul and the rate per mile charged
to the customer, which are dependent upon product mix. Local trucking services
primarily support intermodal marketing and provide local transportation
services to customers through independent operators. Revenues are driven
primarily through increased volume. Pacer Logistics also provides a freight
service in which it consolidates customer freight at loading docks and provides
distribution services to specific customer locations throughout the United
States. In addition to transporting freight, Pacer Logistics provides
outsourcing services for customers' traffic departments and railcar repair and
maintenance.
Net Revenues
Pacer Logistics' net revenues consist of the gross revenues earned from its
third-party transportation services, net of the cost of purchased
transportation services. Net revenues are driven by the mix of business
services provided through its various services provided because net revenues as
a percentage of gross revenues vary significantly based on the mix of services
provided. Purchased transportation and services consists of amounts paid to
third parties to provide services, such as, railroads, sub-contracted or in-
house independent contractor truck drivers, freight terminal operators and dock
workers. Third-party rail costs are charged through a contract maintained with
the railroads and are dependent upon product mix and traffic lanes. Sub-
contracted or independent operators may be paid a percentage of revenues, on a
mileage basis or a fixed fee.
Selling, General and Administrative Expenses
Selling, general and administrative expenses relate to the costs of customer
acquisition, billing, customer service and salaries and related expenses of
marketing, as well as the executive and administrative staff's compensation,
office expenses and professional fees. Pacer Logistics anticipates that it will
incur increased overall selling related costs as it grows its operations, but
that such costs will remain relatively consistent as a percentage of net
revenues. The costs related to Pacer Logistics' corporate functions, such as
administration, finance, legal, human resources and facilities will likely
increase as the business grows, but will likely decrease as a percentage of net
revenues as the business grows.
Transaction Costs
In connection with proposed initial public equity offering, Pacer Logistics
and the Manufacturers Consolidation Service companies, prior to their
acquisition by Pacer Logistics, incurred various non-recurring expenses
associated directly with the offering. These are non-recurring expenses and are
not expected to be incurred in the future.
Depreciation and Amortization
Depreciation and amortization consists of depreciation on office equipment
and Pacer Logistics' owned transportation equipment and goodwill amortization
related to historical acquisitions. Depreciation as a percentage of net
revenues is historically low due to the low level of operating assets owned by
Pacer Logistics, because of the level of reliance on third-party transportation
providers. Pacer Logistics does not expect to significantly change its
operating asset base.
Results of Operations
The following discussion of Pacer Logistics' results of operations covers
the historical operating results for the periods presented plus a discussion of
results as if all of the Pacer Logistics' acquisitions (excluding the
Manufacturers Consolidation Service companies and the Keystone companies) were
acquired at the beginning of the most recent fiscal year presented (referred to
below as the "Integrated Company"). The following discussion of Pacer Logistics
operating results refers to the income statements as historically presented
without reclassifications which were made for pro forma presentation purposes.
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Three Months Ended March 31, 1999 ("First Quarter 1999") Compared to the Three
Months Ended March 31, 1998 ("First Quarter 1998")
Gross Revenues. Gross revenues increased $39.5 million, or 78.4%, to $89.9
million in First Quarter 1999 from $50.4 million in First Quarter 1998. The
increase in revenues was primarily the result of the acquisitions made by Pacer
Logistics in 1998 and through internal growth. Gross revenues for the
Integrated Company decreased 2.7% or $1.9 million. The decrease primarily
results from a change in contractual and billing arrangements for logistics
services, which has no effect on Pacer Logistics' net revenues.
Net Revenues. Net revenues increased $6.3 million, or 75.0%, to $14.7
million in First Quarter 1999 from $8.4 million in First Quarter 1998. Net
revenues as a percentage of gross revenues decreased to 16.4% in First Quarter
1999 from 16.7% in First Quarter 1998. The increase in net revenues is the
result of the acquisitions throughout 1998. The net revenues percentage
decrease reflects the lower margin business from acquisitions. Net revenues for
the Integrated Company increased $0.2 million or 1.7%. The increase primarily
results from increased freight handling services generated by servicing
additional stores and locations for our existing customer base.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.7 million to $10.3 million in First
Quarter 1999 from $5.6 million in First Quarter 1998. As a percentage of gross
revenues, selling, general and administrative expenses increased to 11.5% in
First Quarter 1999 from 11.1% in First Quarter 1998. The increase is due to
additional salary and administrative costs associated with the acquisitions and
growth of Pacer Logistics. Selling, general and administrative expense for the
Integrated Company decreased slightly.
Income From Operations. Operating income increased $1.3 million, or 54.2%,
to $3.7 million and operating income for the Integrated Company increased $0.3
million or 9.7% to $3.4 million, as a result of the foregoing factors.
Interest Expense. Net interest expense increased to $1.1 million in First
Quarter 1999 from $0.6 million in First Quarter 1998. The increase is the
result of increased borrowings to finance Pacer Logistics' acquisitions of the
Interstate companies, Intraco, the Cross Con companies, Professional Logistics
and the Manufacturers Consolidation Service companies.
Income Taxes. Pacer Logistics' effective tax rate increased to 42.8% in
First Quarter 1999 from 41.8% in First Quarter 1998. The increase is due
primarily to the amortization of goodwill related to Pacer Logistics'
acquisitions.
Year Ended December 31, 1998 ("Fiscal 1998") Compared to Nine Months Ended
December 31, 1997 ("Fiscal 1997")
As a result of the management buyout in March 1997, the period ended
December 31, 1997 consists of only nine months as compared to twelve months for
the year ended December 31, 1998. For information purposes, year-to-year
comparisons have also been provided.
Gross Revenues. Revenues increased $171.7 million, or 211.7%, to $252.8
million in 1998 from $81.1 million in fiscal 1997. The increase in revenues was
the result of the acquisitions made by Pacer Logistics in late 1997 and in 1998
and the inclusion of an additional quarter of revenues in 1998. Revenues
increased $152.2 million, or 151.3%, to $252.8 million in the twelve month
period ended December 31, 1998 from $100.6 million in the twelve month period
ended December 31, 1997. Gross revenues for the Integrated Company increased
$27.9 million, or 10.9%. The increase resulted from growth in flatbed services
provided due to increased transportation of materials for a railroad customer,
expansion of freight handling services provided by sub-contracting services for
existing customers and the start-up of the railcar repair services provided in
Long Beach.
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Net Revenues. Net revenues increased $29.1 million, or 234.7%, to $41.5
million in 1998 from $12.4 million in fiscal 1997. Net revenues as a percentage
of gross revenues increased to 16.4% in 1998 from 15.3% in fiscal 1997. The
increase in net revenues is the result of the acquisitions made by Pacer
Logistics in late 1997 and in 1998 and the inclusion of an additional quarter
of revenues in 1998. The net revenue percentage increase reflects the impact
from services provided to railroads in connection with their capital
expenditure programs and the full year inclusion of higher-margin acquired
businesses. Net revenues increased $26.1 million, or 169.5%, to $41.5 million
in the twelve month period ended December 31, 1998 from $15.4 million in the
twelve month period ended December 31, 1997. Net revenues for the Integrated
Company increased $7.4 million or 18.9%. The increase in gross revenues noted
above was related to the relatively high margin of the services provided which
is the primary reason for the substantial percentage increase in net revenue.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $18.9 million to $27.7 million in 1998 from
$8.8 million in fiscal 1997. As a percentage of gross revenues, selling,
general and administrative expenses increased to 11.0% in 1998 from 10.8% in
fiscal 1997. The increase is due to the additional quarter of selling, general
and administrative costs in 1998 and to additional salary and administrative
costs associated with the acquisitions and growth of Pacer Logistics. Selling,
general and administrative expenses increased $16.6 million, or 149.5%, to
$27.7 million in the twelve month period ended December 31, 1998 from $11.1
million in the twelve month period ended December 31, 1997. Selling, general
and administrative expenses for the Integrated Company increased $3.8 million,
or 12.8%. The increase primarily results from increases in variable costs
associated with the increase in net revenues and additional corporate overhead.
Transaction Costs. During 1998, Pacer Logistics incurred transaction costs
of $1.5 million associated with the preparation and filing of a registration
statement on Form S-1 related to an initial public offering of common stock.
The initial public offering was not completed due to prevailing market
conditions in the equity markets at the time of the proposed offering;
accordingly, the costs were charged off in 1998.
Income From Operations. Operating income increased $7.1 million or 221.9% to
$10.3 million in 1998 from $3.2 million in fiscal 1997. Operating income
increased $6.9 million, or 202.9%, to $10.3 million in 1998 from $3.4 million
in the twelve months ended December 31, 1997. Operating income for the
Integrated Company increased $3.6 million or 37.9% as a result of the foregoing
factors.
Interest Expense. Net interest expense increased to $2.9 million in 1998
from $0.7 million in fiscal 1997. The increase is the result of increased
borrowings to finance Pacer Logistics' acquisitions of the Interstate
companies, Intraco, the Cross Con companies, Professional Logistics and the
Manufacturers Consolidation Service companies.
Income Taxes. Pacer Logistics' effective tax rate increased to 42.7% in 1998
from 38.9% in fiscal 1997. The increase is due primarily to the amortization of
goodwill related to acquisitions made during the period.
Nine Months Ended December 31, 1997 (Fiscal 1997) Compared to Year Ended
December 31, 1996 (1996)
As a result of the management buyout in March 1997, the period ended
December 31, 1997 consists of only nine months as compared to twelve months for
the year ended December 31, 1996. For information purposes, year-to-year
comparisons have also been provided.
Gross Revenues. Gross revenues decreased $5.7 million, or 6.6%, to $81.1
million in Fiscal 1997 from $86.8 million in 1996. This decrease is due to the
additional quarter of revenues in 1996, which is partially offset by additional
business with Union Pacific in Fiscal 1997. Revenues increased $13.8 million,
or 15.9%, to $100.6 million in the twelve month period ended December 31, 1997
compared to $86.8 million in the twelve month period ended December 31, 1996.
The increase results primarily from volume growth in rail brokerage and flatbed
trucking services.
Net Revenues. Net revenues decreased $1.3 million, or 9.5%, to $12.4 million
in Fiscal 1997 from $13.7 million in 1996. Net revenues as a percentage of
gross revenues decreased to 15.3% in Fiscal 1997 from 15.8% in 1996. The
decrease is due to the additional quarter of revenues in 1996, which is
partially offset by additional business with Union Pacific in Fiscal 1997.
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The net revenues percentage decrease reflects a marginal increase in the
cost of purchased transportation. Net revenues increased $1.7 million, or
12.4%, to $15.4 million in the twelve month period ended December 31, 1997 from
$13.7 million in the twelve month period ended December 31, 1996. Net revenues
for the Integrated Company increased $4.3 million, or 12.3%. The increase is
primarily attributable to the growth in gross revenues for rail brokerage and
flatbed trucking.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.2 million to $8.8 million from $10.0
million in 1996. As a percentage of gross revenues, selling, general and
administrative expenses decreased to 10.8% in Fiscal 1997 from 11.5% in 1996.
The decrease is due to the additional quarter of selling, general and
administrative expenses included in 1996, which is partially offset by
additional salary and administrative expenses associated with the growth of
Pacer Logistics and its management team after the management buyout. Selling,
general and administrative expenses increased $1.1 million, or 11.0% to $11.1
million in the twelve month period ended December 31, 1997 as compared to $10.0
million in the twelve month period ended December 31, 1996. Selling, general
and administrative expenses for the Integrated Company increased $2.0 million
or 7.2%. The increase is primarily attributable to increases in variable costs
associated with the increase in rail brokerage and flatbed trucking services
provided.
Income From Operations. Operating income decreased $0.3 million, or 8.6%, to
$3.2 million in fiscal 1997 from $3.5 million in 1996. Operating income
decreased $0.1 million, or 2.9%, to $3.4 million in the twelve months ended
December 31, 1997 from $3.5 million in 1996. Operating income for the
Integrated Company increased $2.3 million or 31.9%, as a result of the
foregoing factors.
Interest Expense (Income). Net interest expense increased $2.1 million to
$0.7 million in Fiscal 1997 from $1.4 million in net interest income in 1996.
The increase is a result of increased borrowings to finance the management
buyout and the acquisition of Interstate.
Income Taxes. Pacer Logistics' effective tax rate remained relatively
unchanged in Fiscal 1997 as compared to 1996.
Liquidity and Capital Resources
Since its inception on March 31, 1997, Pacer Logistics' cash needs have been
primarily to fund acquisitions, working capital and, on a limited basis,
capital expenditures. Pacer Logistics' primary sources of capital have been the
borrowings under bank credit agreements, and in Fiscal 1997, cash raised in
connection with the formation of Pacer Logistics. In addition, Pacer Logistics
has issued shares of common stock as part of the consideration in certain
acquisitions. Pacer Logistics uses its bank credit agreement to manage its cash
flow. At March 31, 1999 and December 31, 1998, availability under its bank
credit agreement was $17.7 million and $17.6 million, respectively, and Pacer
Logistics' working capital was $1.5 million and $0.4 million, respectively.
Net cash provided from operating activities was $1.0 and $2.7 million during
the First Quarter 1999 and First Quarter 1998, respectively. The decrease in
cash provided was primarily due to a reduction in accrued expenses, partially
offset by an increase in income taxes payable. Net cash provided by operating
activities for 1998 was $0.8 million, and the net cash used in operating
activities for Fiscal 1997 was $2.7 million. The increase in cash provided from
operating activities in 1998 as compared to Fiscal 1997 is due primarily to
higher net income in 1998.
Net cash provided from (used in) investing activities was $2.6 million and
$(0.4) million in the First Quarter 1999 and First Quarter 1998, respectively.
Pacer Logistics received $3.0 million from the sale of trucks acquired as part
of the acquisition of the Manufacturers Consolidation Service companies. Net
cash used in investing activities was $20.3 million and $10.0 million in 1998
and Fiscal 1997, respectively. Net cash used in investing activities was used
primarily to finance the acquisitions of Intraco, the Cross Con companies,
Professional Logistics, 3PL and the Manufacturers Consolidation Service
companies in 1998 and the management buyout and the acquisition of the
Interstate companies in Fiscal 1997.
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Net cash used in financing activities in First Quarter 1999 and First
Quarter 1998 was $3.6 million and $2.3 million, respectively, principally used
to repay outstanding indebtedness. Net cash provided by financing activities
was $19.4 million and $11.2 million during 1998 and Fiscal 1997, respectively.
The net cash provided by financing activities in 1998 was provided by
borrowings under Pacer Logistics' bank credit agreements. In Fiscal 1997, net
cash provided by financing activities was provided by borrowings under Pacer
Logistics' bank credit agreements and cash raised in connection with the
formation of Pacer Logistics. On December 7, 1998, Pacer Logistics entered
into a bank credit agreement consisting of a term loan of $32.0 million and
revolving credit facility of $38.0 million. In conjunction with the credit
agreement, the amounts outstanding under the term loan of $20.0 million and
$12.0 million line of credit were repaid.
Year 2000
The Year 2000 issue arises because many computerized systems use two digit
dates instead of four digits to identify the year, causing some date sensitive
systems to incorrectly recognize and process information.
Resolution of the Year 2000 problem is among Pacer Logistics' highest
priorities, and a task force been established to address its many aspects. The
task force activities relate to the following four business categories:
. Infrastructure, consisting of computing systems hardware and systems
software.
. Applications Software, consisting of vendor provided or custom written
operations software.
. Embedded Processors in equipment used by the Company, consisting of
communications equipment, voice and data, and other miscellaneous
systems.
. Significant third party vendors and service providers and customers.
Pacer Logistics has developed a five-phase approach to resolving the Year
2000 issue. The phases are:
. Inventory of all data-sensitive systems and equipment,
. Assessing compliance and assigning priorities to items identified as not
being compliant,
. Remediation of non-compliant items,
. Testing and certification of systems and equipment being brought into
compliance, and
. Contingency planning to provide for continuity of business activities in
the event of unanticipated failures, whether of internal or external
origin.
Approximately 90% of the actions required relating to Infrastructure have
been completed as of the end of First Quarter, 1999. All such components are
expected to be fully compliant by the end of the third quarter of 1999.
Testing and certification will continue into the second half of 1999.
Remediation is underway for all Applications Software currently in use by
the Company. At the end of First Quarter 1999 approximately 75% of all vendor
provided software in use is represented by the vendor to be compliant. The
remaining percentage is being replaced. Custom written software that is not
compliant has in most instances been or is being replaced by vendor-provided
software that is compliant. In certain cases, custom written software is being
internally brought into compliance. Testing and certification is currently in
process. Remediation will continue into the third quarter.
Inventories of Embedded Processors have been reviewed and non-compliant
items have been identified for remediation. Activities are underway upgrading
or replacement as required. This activity should be complete by the end of the
third quarter of 1999.
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Pacer Logistics has initiated formal communications with all of its
significant vendors and customers, with special attention being directed toward
electronic business partnerships, to determine vulnerability to those third
parties' failure to remediate their Year 2000 issues. This process is ongoing
and will continue into the second half of 1999.
Although Pacer Logistics is striving to assure that its products and
services are Year 2000 ready, Pacer Logistics cannot guarantee that all systems
and services will function without error before, at or after December 31, 1999.
Service may still be affected by the performance of third parties with which
Pacer Logistics does business, or exchanges information. We believe, however,
that our efforts will avoid significant problems and will enable us to rapidly
address and correct any problems that do arise.
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BUSINESS
Overview
We are a leading freight transportation and logistics provider, offering a
broad array of services to facilitate the movement of freight from origin to
destination. We believe, as one of the largest transporters of intermodal
freight in North America, we controlled approximately 23.0% of all domestic
intermodal containers in 1998. We are also the third largest intermodal
marketing company in the United States, as measured by intermodal rail
revenues. Intermodal transportation is the movement of freight via trailer or
container using two or more transportation modes. Intermodal transportation
nearly always includes a rail and truck segment. An intermodal marketing
company arranges intermodal transportation for global, national and regional
retailers and manufacturers. Our pro forma gross revenues and Adjusted EBITDA
were $987.4 million and $72.2 million, respectively, for the twelve month
period ended April 2, 1999. Through implementation of our unique business
model, we believe we maintain an advantage over our competitors by providing
our customers with access to:
. a low cost single-source package of integrated transportation services;
. our coast to coast land transportation network with priority handling
status;
. one of the largest container and chassis fleets in the industry; and
. sophisticated information systems.
Through our stacktrain business, we are the largest provider of intermodal
rail service in North America that is not affiliated with an individual
railroad company. Stacktrain service is the movement of freight in containers
stacked two high on railcars. Through this business, we provide our customers
with rail capacity, equipment and shipment tracking and control on a nationwide
basis. We operate one of the industry's largest fleets of stacktrain equipment,
including railcars, containers and chassis. Through contracts with major rail
carriers and our access to sophisticated proprietary information systems, we
operate our equipment over a 50,000 mile rail network. We benefit from having
developed close working relationships with the railroads and we are the single
largest customer of our primary rail carrier, historically representing
approximately 20% of its intermodal revenues. In the past, during periods of
equipment scarcity and network bottlenecks, we have benefited from our strong
relationships with our rail carriers and capitalized on our priority handling
status with such carriers. In addition, our access to sophisticated information
systems allows us to track shipments throughout our rail network and provide
shippers with a level of service which we believe is unmatched in the industry.
The breadth of our rail network, together with our access to such information
systems, allows us to manage our fleet of equipment on a national basis and
thereby maximize availability, utilization and reliability. On a pro forma
basis from 1996 to 1998, we increased our intermodal shipments by an average of
12.6% per annum through the addition of new customers and increased volumes
with existing customers.
Complementing our stacktrain business, we offer a broad range of additional
transportation services, including trucking, intermodal marketing and logistics
services, to a broad range of shippers such as Sony, Ford Motor Company and
Wal-Mart Stores. As an integrated provider of transportation services, we can
optimize the flow of freight across multiple transportation modes or develop a
unique package of customized transportation and logistics services to meet our
customers' specific needs. As a single-source provider, we negotiate rail,
truck and intermodal rates, determine the optimal route, electronically track
shipments in transit, consolidate billing and handle claims of freight loss or
damage on behalf of our customers, and manage the handling, consolidation and
storage of freight throughout the process. Our size and scope allow us to
provide a comprehensive product offering on a national basis and pass on volume
rate savings and economies of scale to our customers.
A significant portion of our intermodal, trucking, logistics and freight
handling services is provided through a network of agents and independent
contractors. These relationships allow us to control a large fleet of
specialized equipment and provide our customers with a broad range of
transportation services without
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committing significant capital to the acquisition and maintenance of an
extensive asset base. Our relatively low capital and working capital
requirements and variable cost structure enable us to generate strong free cash
flow in a variety of market conditions.
We have an experienced management team with a strong record of successfully
integrating businesses in the transportation industry. Donald C. Orris, our
chairman, president and chief executive officer, was previously the chairman,
president and chief executive officer of Pacer Logistics and was the president
and chief operating officer of the Southern Pacific Transportation Company (now
part of the Union Pacific Railroad Company). Mr. Orris also founded our
stacktrain business in 1984 while he was an officer of APL Limited. After
giving effect to our option plans and assuming the exchange of certain
preferred stock of Pacer Logistics, Mr. Orris and other members of our senior
management team and certain other employees will own approximately 29.0% of
Pacer International's capital stock on a fully diluted basis. If the exchange
of certain preferred stock of Pacer Logistics for common stock of Pacer
International or the purchase by Pacer International of such preferred stock of
Pacer Logistics with certain preferred stock of Pacer International does not
occur, Mr. Orris and other members of our senior management team will remain
holders of preferred stock of Pacer Logistics. See "Our Capital Stock."
Competitive Strengths
We believe our market leadership, strong historical financial performance
and significant opportunities for continued growth and increased profitability
are primarily attributable to the following competitive strengths:
Leading Intermodal Shipper
We believe, as one of the largest transporters of intermodal freight in
North America, we controlled approximately 23.0% of all domestic intermodal
containers in 1998. Our North American land transportation network spans over
50,000 miles and directly serves most major population and commercial centers.
Due to our significant intermodal market share, we have developed close working
relationships with major railroads, including long-term operating agreements
with favorable rates, priority handling status and access to nationwide
terminal facilities. In addition to our relationships with our rail providers,
we maintained as of June 25, 1999 a fleet of 558 double stack railcars, 19,693
containers and 18,551 chassis, which are primarily leased, and have access to
APL Limited's fleet of chassis and containers. We believe that the contract
terms with our rail providers combined with our extensive fleet of equipment
allow us to pass significant cost savings to our customers and provide them
with a high degree of reliability and responsiveness.
Strong Customer Base
We have a strong, diverse customer base consisting of global, national and
regional manufacturers and retailers, including numerous Fortune 500 companies
such as Sony, Ford Motor Company and Wal-Mart Stores. We have served many of
our customers for over 15 years and believe that the strength of our customer
base is attributable to our customer-focused marketing and service philosophy.
We create a customized package of integrated transportation services for many
of our customers and seek to expand our customer relationships by matching each
customer's transportation and logistics needs with our broad menu of service
offerings, with many customers using more than one service. We believe that our
customers will increasingly look to us as the industry's trend towards single-
source outsourcing continues.
Flexible Business Model
We seek to limit the capital investment required to maintain and grow our
business and, therefore, maximize our returns on invested capital. Our business
model provides the following key benefits:
. We have developed our transportation network through contracts and
arrangements with various rail partners, trucking companies, independent
contractors and agents and other providers thereby limiting our
investment in equipment, facilities and working capital;
. The majority of our equipment is leased based on flexible leasing
arrangements, which contributes to our ability to maintain an 80%-90%
variable cost structure;
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. Favorable contractual terms with our rail and truck service providers
due to our high shipment volume allow us to operate with favorable net
working capital; and
. An ability to generate strong free cash flow in a variety of market
conditions.
Counterbalanced Freight Flows
We have a unique balance of domestic and internationally originating freight
flow, which enables us to maximize the return on our intermodal equipment and
negotiate incentives with our transportation providers. The majority of Asian
exports to the United States which are transported by rail are moved from ports
on the West Coast to population centers in the midwest and northeast regions.
However, domestic railroad freight which originates in the United States moves
predominantly westbound from eastern and midwestern production centers to
consumption centers on the West Coast. Our access to APL Limited's
international equipment delivered to the interior of the United States from
trans-Pacific shipments allows us to further support our domestic westbound
business. We are able to achieve high utilization rates and steady revenue
production from our intermodal equipment due to our high volume of both
eastbound and westbound shipments.
Experienced Management Team with Substantial Equity Ownership
We have an experienced management team with a strong record of successfully
integrating businesses in the transportation industry. Our senior management
team has an average of over 25 years of experience in the transportation and
logistics industry, and we believe their knowledge and relationships within the
industry provide us with a significant competitive advantage. After founding
our stacktrain business in 1984 while at APL Limited, Mr. Orris and his
management team managed the growth of the business and related operations to
over $1.0 billion in annual revenues by 1990. In addition, over the past two
years, Mr. Orris and his management team have successfully grown Pacer
Logistics' 1996 EBITDA of $3.6 to 1998 Adjusted EBITDA of $19.1 million. After
giving effect to our stock option plans and assuming the exchange of certain
preferred stock of Pacer Logistics, Mr. Orris and other members of our senior
management team and certain other employees will own approximately 29.0% of
Pacer International capital stock on a fully diluted basis.
Growth Strategy
We have developed a strategy designed to increase revenues, cash flow and
profitability while maximizing returns on invested capital. Our management team
has established a history of internal growth. Our pro forma gross revenues and
Adjusted EBITDA were $981.6 million and $69.9 million, respectively, for the
fiscal year ended December 25, 1998. For the twelve month period ended April 2,
1999, our pro forma gross revenues and Adjusted EBITDA were $987.4 million and
$72.2 million, respectively. The primary components of our growth strategy
include:
Capitalize on Stacktrain Growth Opportunities
We believe that the stacktrain business, which has grown at a compound
annual rate of 15.0% over the last decade, provides a significant opportunity
for continued growth. We expect our stacktrain business to take additional
market share from other forms of container and trailer transport due to
economic and operational efficiencies offered by the stacktrain technology. In
addition, recent consolidation and restructuring in the railroad industry
caused an increase in the average duration of stacktrain shipments from origin
to destination. We believe that this reduced level of service resulted in lost
profit opportunities which can be recaptured as the railroad industry returns
to historical service levels. We have also recently added additional 53-foot
containers and chassis to our equipment fleet. This larger-sized equipment
provides us with a cost-efficient capacity to capture additional load volume.
In addition, we believe that our acquisition of the stacktrain business and its
separation from APL Limited, an international shipping company, will lead to
increased business from other international shipping companies who were
historically reluctant to contract with a subsidiary of a direct competitor.
Finally, our senior management team has extensive experience in the intermodal
business and we believe they will be better able to capitalize quickly on
growth opportunities by operating the stacktrain business independently from
APL Limited.
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Expand Service Offerings to Capitalize on Strong Logistics Industry Trends
We believe it is important to meet the diverse needs of customers who are
increasingly looking to outsource their transportation requirements. We intend
to capitalize on the continuing trend of vendor consolidation and outsourcing
by maintaining a broad range of service offerings and introducing new services
to handle our customers' diverse transportation and logistics requirements. Our
recent acquisitions have added rail-related logistics services and expanded our
geographic coverage for our intermodal marketing capabilities. We believe that
through our broad menu of existing service offerings and the development and
acquisition of new service offerings we can continue to provide and expand our
integrated transportation service on an efficient and cost effective basis.
Increase Sales to Existing Customers
We intend to increase our revenues by providing additional transportation
services to existing customers. We believe that by offering a broad menu of
services, we will be able to expand our relationships with our existing
customers. Our strategy involves a continued focus on capturing additional
freight volume from existing customers which is currently being shipped by
long-haul trucking companies or intermodal competitors as well as providing
logistics services. For example, while we have provided J.C. Penney with
substantial local trucking services in Southern California for several years,
J.C. Penney has recently awarded us a new contract providing for freight
consolidation and handling in Southern California.
Expand Our Customer Base
We believe our national presence, large size and broad scope of services
make us well positioned to capture an increasing number of customers seeking a
single-source freight transportation and logistics provider. We intend to
expand our customer base by leveraging our operating infrastructure and adding
sales agents and independent contractors. We expect that expansion in these
areas will increase our capacity to solicit and maintain customer
relationships, thereby increasing our geographic scope and expanding our size
and service offerings. In addition, we believe our stacktrain business is well-
positioned to acquire new business from international shipping companies who
were historically reluctant to utilize our stacktrain services when the
business was owned by APL Limited, a direct competitor of such international
shipping companies.
Pursue Strategic Acquisitions
As an additional component of our growth strategy, we intend to continue our
disciplined acquisition program. For example, since Pacer Logistics' founding
in 1997, Pacer Logistics has completed six acquisitions with a total
transaction value, including debt assumed, of approximately $65.0 million,
including transaction costs. Acquisition candidates typically will fall into
one or more of the following three categories:
. operations that expand our presence in a particular service category;
. operations that expand our existing services in a new geographic area;
or
. operations that enable us to provide a new or expanded form of
complementary services to our customer base.
Due to the fragmented nature of the industry and the general industry trend
toward consolidation, we believe there is increased pressure on these smaller
transportation and logistics companies to consolidate. We intend to seek
acquisition candidates with complementary management and operating philosophies
and service capabilities that we can add to and integrate with our current menu
of services.
The Freight Transportation and Logistics Industry
Overview
The domestic freight transportation and logistics market includes the
transport of goods made and consumed domestically, the domestic portion of the
transport of international freight and the supply of logistics services such as
warehousing and logistics administration. The total commercial freight
transportation and
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logistics market in 1997 was approximately $536.0 billion, representing over
6.0% of the U.S. economy measured as a percentage of gross national product.
Providers of freight transportation services include private shippers who
manage the transportation of their own freight, for-hire service providers such
as over-the-road trucking companies and third-party transportation and
logistics companies such as intermodel marketing companies. The bases of
competition in the freight transportation industry are primarily cost, delivery
time, reliability and precision of delivery and pick-up, as well as freight-
specific requirements such as handling and temperature control.
Transportation modes include rail, highway, water, air and pipeline
transportation. Ground transportation is the largest component of the domestic
freight transportation market, totaling approximately $409.0 billion in 1997.
Ground transportation consists primarily of trucking and rail services, with a
small portion related to pipeline transport. Transportation service offerings
that utilize multiple modes of transportation are commonly known as intermodal.
Our services are targeted at freight that is shipped within the United States
by truck or rail or by intermodal transport between truck and rail.
The commercial transportation and logistics market also includes several
types of intermediary firms that facilitate the movement of freight by
providing services such as logistics, warehousing and intermodal marketing.
Intermodal marketing companies sell intermodal service to shippers while buying
space on intermodal rail trains. These companies provide a link between
intermodal rail service providers and a significant number of shippers and
often provide additional transportation and logistical services such as
consolidation and warehousing.
In recent years, many sectors of the transportation industry have
experienced a trend toward consolidation. Increasingly, providers of
transportation services are seeking to use information technology and
customized service packages to offer their customers solutions to broader
transportation-related concerns. Since 1992, the third party transportation
industry has grown at a compound annual rate in excess of 20%, as compared to
3% per annum growth for the remainder of the domestic freight transportation
industry as a whole, as shippers have increasingly outsourced their
transportation requirements. The U.S. market for third-party transportation
services is highly fragmented, however, consolidation is accelerating as
shippers seek single-service providers to merge all aspects of freight
transportation and logistics management.
Intermodal/Stacktrain
Intermodal transportation is the movement of freight from origin to
destination via trailer or container using two or more transportation modes.
Intermodal transportation nearly always includes a rail and truck segment. Rail
transportation is the primary mode for the movement of intermodal freight with
truckers typically providing transportation at the points of origin and
destination. Intermodal transportation addresses certain of the problems of
traditional rail service because the use of multiple modes of transit allows
for "door-to-door" transportation in a competitive manner. The intermodal
market currently comprises approximately $10.0 billion, or 2.3%, of the total
domestic freight market excluding logistics services such as warehousing and
logistics administration. From 1980 to 1997, railroad intermodal traffic
increased at a compound annual rate of 6.3% while overall rail traffic grew
only 2.3% compounded annually. In 1998, total intermodal shipments declined
1.0% due to a decline in the intermodal transport of truck trailers on railroad
flatcars. However, the shipment of intermodal freight in containers, which
constitutes all of our stacktrain business, increased 3.3% in 1998. The decline
in the intermodal transport of truck-trailers was primarily attributable to
rail service disruptions related to consolidation and restructuring in the rail
industry. These service problems are being resolved by the railroads and
management believes that the intermodal industry will return to historical
growth rates for both containers and trailers.
In 1997, approximately $6.0 billion, or 18%, of railroads' total revenues
were generated from intermodal shipments. As intermodal transportation has
increased as a percentage of railroad revenues and volume, railroads have made
significant capital expenditures upgrading track and equipment to increase the
efficiency of intermodal service. Despite rail service disruptions in 1997 and
1998, the industry's general trend towards consolidation, cost reduction and
improved technology are expected to yield improved process management,
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asset utilization and service quality and reliability. We anticipate that these
improvements will be passed through to intermodal service. In addition, the
increased spending on railroad infrastructure is expected to further improve
the ability of intermodal rail transport to compete with motor carriers.
Intermodal transportation has benefited from the introduction of stacktrain
service, consisting of the movement of cargo containers stacked two high on
special rail cars. Stacktrain service significantly improves the efficiency of
intermodal transportation by increasing capacity at low incremental cost
without sacrificing quality of service. For both international and domestic
freight, stacktrain service has grown faster than intermodal freight
transportation generally, with revenues for domestic stacktrain services
growing at a compound annual rate of 15.0% over the last decade to
approximately $3.6 billion in 1998. With approximately 58.4% of our 1998 pro
forma gross revenues generated by our stacktrain operations, we believe we are
well positioned to take advantage of continued growth in the intermodal
transportation sector.
In the intermodal sector, railroads and shippers rely on intermodal
marketing companies which currently handle 60.0% to 70.0% of all intermodal
shipments. An intermodal marketing company arranges intermodal transportation
for global, national and regional retailers and manufacturers. The intermodal
marketing industry originated because railroads chose not to invest in the
infrastructure and resources needed to market their intermodal services.
Intermodal marketing companies pass on the economies of scale attributable to
volume purchasing arrangements to shippers and provide shippers access to large
equipment pools. In addition, intermodal marketing companies generally have
superior information systems and can take full responsibility for shipments
that may move among numerous railroads or truckers while in transit.
Trucking
The trucking segment of the transportation industry generated revenues of
approximately $347.0 billion in 1997, or 79.0% of the total domestic freight
transportation market excluding logistics services. The trucking market is
comprised of private and for-hire fleets, handling either truckload or less-
than-truckload shipments over various lengths of haul. Relative advantages of
trucking versus other modes include flexibility of pickup, route, and delivery
as well as relatively rapid delivery cycles. Trucking is often at a cost
disadvantage versus other modes of transportation, such as rail, due to
capacity limitations and high variable costs related to fuel and labor.
However, trucking is often advantageous for shorter lengths of haul. Private
fleets operated by shippers represent the largest sector of the non-local
trucking industry, but has been losing market share to for-hire carriers since
deregulation of the industry began in 1980. Shippers' increased focus on cost
reduction and core competencies has led to an accelerated rate of growth of the
for-hire trucking sector.
The trucking industry is divided into the truckload and less-than-truckload
sectors, both of which are highly fragmented. The truckload sector is composed
primarily of specialized carriers operating in markets defined by the length of
haul and the type of equipment utilized. Excluding private fleets, revenues in
the truckload segment were $65.0 billion in 1997, generated by 50,000 carriers,
approximately 95.0% of which had annual revenue of less than $1.0 million. A
majority of the trucking services we provide are truckload services. Less-than-
truckload carriers specialize in consolidating smaller shipments into truckload
quantities for transportation across regional and national networks. Many less-
than-truckload carriers have high fixed costs due to investments in
infrastructure. Other less-than-truckload carriers utilize the fixed facilities
of others and provide specialized outsourced services. The less-than-truckload
market generated approximately $18.0 billion of revenues in 1997. We derive
only a small portion of our revenues from less-than-truckload freight.
Other elements of the trucking industry include truck brokerage and the use
of independent contractors to provide services. Truck brokerage involves the
outsourced arrangement of trucking services by a third-party with a licensed
carrier on behalf of a shipper. Truck brokerage allows the provider to offer
trucking services without actually having dedicated capacity. The use of
independent contractors generally facilitates a low investment in
transportation equipment and increased flexibility.
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Railroads
The railroad industry generated revenues of approximately $36.0 billion in
1997, or 8.0% of the total domestic freight transportation market excluding
logistics services. The major participants in the rail market are Union Pacific
($9.8 billion of 1997 revenues), Burlington Northern Santa Fe ($8.4 billion),
CSX Transportation ($5.0 billion) and Norfolk Southern ($4.2 billion). Rail
transportation is particularly competitive for moving freight over long
distances, due to its high capacity per shipment and low variable labor and
fuel requirements per ton/mile. Rail service generally offers less flexibility
relative to trucking because it is limited in its origin and destination
points. The railroad industry has been characterized in recent years by several
mergers, including Burlington Northern and Santa Fe in 1995, Union Pacific and
Southern Pacific in 1996 and most recently, the division of Conrail between CSX
and Norfolk Southern which was completed in June 1999. Integration problems
have contributed to rail service disruptions following certain of the mergers.
For example, following the Union Pacific/Southern Pacific merger, labor
shortages and delayed integration of the companies' information systems
contributed to misrouted and lost freight cars as well as general service
delays. In addition, the Conrail/CSX/Norfolk Southern transaction has resulted
in some service disruptions in markets formerly served by Conrail. Despite
these difficulties, the railroad mergers have generally contributed to cost
savings in the industry by cutting employment, and the railroads are expected
to return to historical service levels as the integration problems are
resolved. In addition, railroads have reduced their costs through increased
utilization of new technology and outsourcing.
Logistics
Logistics is the management and transportation of materials and inventory
throughout the supply chain. The logistics business has been bolstered in
recent years by the competitiveness of the global economy, which causes
shippers to focus on reducing handling costs, operating with lower inventories
and shortening inventory transit times. The logistics sector of the commercial
freight transportation market was approximately $30.0 billion in 1997. Using a
network of transportation, handling and storage providers in multiple
transportation modes, logistics companies seek to improve their customers'
operating efficiency by reducing their inventory levels and related handling
costs. Many logistics providers are non-asset-based, primarily utilizing
physical assets owned by others in multiple transport modes. The logistics
business increasingly relies upon advanced information technology to link the
shipper with its inventory and as an analytical tool to optimize transportation
solutions. This trend favors the larger, more professionally managed companies
that have the resources to support a sophisticated information technology
infrastructure.
Freight Handling, Consolidation and Storage
Because of the complexity of freight patterns and the need to optimize
multi-modal routes, the handling and storage of freight on behalf of the
shipper is often required during the transportation process. Certain of these
services involve freight consolidation and deconsolidation, in which freight is
unloaded, temporarily stored in warehouses or on cross-docks, and then re-
loaded for further shipment. An example of such a service category in which we
compete involves the unloading of imported container freight on the West Coast
and the reconsolidation of the freight into new shipments for domestic
redistribution.
Our Service Offerings
Stacktrain Rail Service
Our stacktrain operations originated in the efforts of American President
Lines, an international ocean shipper and an affiliate of APL Limited, to
transport its international freight to destinations within North America in a
cost and time efficient manner. American President Lines had historically
shipped freight through the Panama Canal to reach destinations on the East
Coast of the United States or relied directly on railroads to transport its
international freight to destinations within North America. However, due to the
length of shipping times for transportation through the Panama Canal and the
lack of control and inconsistent service levels associated with direct reliance
on the railroads, APL Limited and American President Lines determined that it
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would be more efficient and cost-effective to develop a proprietary intermodal
rail service. The superior performance of this proprietary intermodal rail
service, and the subsequent development of stacktrain service, became the
basis for the offering of stacktrain service to third parties. APL Limited has
indicated it is selling its stracktrain business pursuant to the strategy of
its corporate parent, Neptune Orient Lines, to focus its operations on global
container transportation and logistics services.
Through our stacktrain business, we are the largest provider of intermodal
rail service in North America that is not affiliated with an individual
railroad company. The size of our equipment fleet, our frequent departures and
the scope of our geographic coverage provide us with a significant advantage
in attaining the responsiveness and reliability required by our customers. In
addition, the geographic coverage provided by our transportation network
provides our customers with single-company control over their rail
transportation requirements and thereby increases both cost effectiveness and
reliability. Our access to sophisticated information technology enables us to
continuously track cargo containers, chassis and railcars throughout our
transportation network. We market our services primarily to intermodal
marketing companies and shippers and compete primarily against rail carriers
offering intermodal service and over-the-road full truckload carriers.
Our 50,000 mile rail transportation network is accessed through long-term
contracts and other arrangements with major rail carriers in North America.
Through the geographic coverage of our rail network and our terminal
locations, we serve most major population and industrial centers in the United
States, Canada and Mexico. As a result of our extensive transportation
network, many of our customers view us as the only national railroad and value
our ability to control an entire freight movement from coast to coast. Given
our significant intermodal rail market share, we have developed close working
relationships with the railroads. We have long-term contracts with the rail
carriers which provide, among other things, for favorable rates, guaranteed
minimum service levels and the utilization of certain terminal facilities. In
addition, we have benefited in the past from our strong relationships with
rail carriers and have capitalized on our priority handling status during
times of equipment scarcity and network bottlenecks.
We maintain an extensive fleet of railcars, containers and chassis. Our
equipment consists of 558 doublestack railcars, 19,693 containers and 18,551
chassis as of June 25, 1999. We also have access to APL Limited's fleet of
equipment, which we use to support the eastbound domestic transport of
international freight for APL Limited and other international shipping
companies. In addition, we provide APL Limited with equipment repositioning
services through which we transport APL Limited's empty containers from
destinations within North America to their West Coast points of origin. To the
extent we are able to fill these empty containers with the westbound freight
of other stacktrain customers, we receive compensation from both APL Limited
for our repositioning service and from the other customers for shipment of
their freight. Management believes that we have access to over 100,000 empty
containers annually for repositioning. In 1998 we filled 65,645 repositioned
containers with freight for shipment via our stacktrain network on behalf of
our domestic customers. Because of increased Pacer Logistics volumes, we
believe that we will be able to increase the percentage of repositioned
containers that are filled and transported on behalf of our customers and
thereby increase the profitability of our repositioning business. See "Certain
Agreements."
Our proprietary fleet of equipment, priority handling status with rail
carriers and range of transportation services has resulted in an outstanding
track record of service quality, reliability and consistency. Through our
equipment fleet and long-term arrangements with rail carriers, we can control
our assets, linehaul operations and terminal operations and thereby provide a
high level of intermodal service. We are therefore positioned to provide a
reliable, cost effective and highly competitive transportation alternative.
Our stacktrain business was recognized in 1998 as "Best of the Best" for on-
time performance, value, equipment and operations, customer service and
technology and was ranked first overall as an intermodal service provider in a
survey of 3,500 shippers conducted by Logistics Management & Distribution
Report and Cahners Research. In addition, we believe that our unique market
position and service offerings position us to capitalize on considerable
growth opportunities in the intermodal transportation market.
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Intermodal Marketing
In our role as an intermodal marketing company, we arrange for the movement
of freight in containers and trailers throughout North America for global,
national and regional manufacturers and retailers and provide customized
electronic tracking and analysis of charges. In addition, we negotiate rail,
truck and intermodal rates, determine the optimal route, electronically track
shipments in transit, consolidate billing, handle claims of freight loss or
damage on behalf of our customers and manage the handling, consolidation and
storage of freight throughout the process. We provide the majority of these
services through a network of agents and independent contractors. Our
intermodal marketing operations are based in Lafayette (California), Los
Angeles, East Rutherford (New Jersey), Memphis and Chicago and employ
experienced transportation personnel. This staff is responsible for operations,
customer service, marketing, management information systems and our
relationships with the rail carriers.
Through our intermodal marketing operations we assist the railroads and our
stacktrain operation in balancing freight originating in or destined to its
service areas, resulting in improved asset utilization. In addition, we provide
value to our customers by passing on certain economies of scale as a volume
buyer from railroads, stacktrain operators, trucking companies and other third
party transportation providers, thereby providing access to large equipment
pools and streamlining the paperwork and logistics of an intermodal move. We
believe that the combination of our stacktrain operations with our intermodal
marketing services will enable us to provide enhanced service to our customers
and the opportunity for increased profitability and growth.
Trucking Services
We also offer a number of trucking services. We believe that our ability to
provide a range of trucking services provides a competitive advantage as
companies increasingly seek to outsource to those companies which can manage
multiple transportation requirements.
We compete in both the truckload and less-than-truckload segments of the
trucking industry, although the majority of our trucking revenues are derived
from truckload operations. Our truckload operations consist of flatbed and
specialized heavy-haul trucking services. Our less-than-truckload operation
specializes in long-haul transportation of a variety of freight through hubs
operated by others throughout the United States. Our less-than-truckload
operations leverage the mix of traffic we receive from customers by integrating
shipments which have common destinations in order to lower the linehaul, pick-
up and delivery costs. Our capital investment in both less-than-truckload and
truckload operations is limited. Pursuant to our truckload operations, we
control a specialized fleet of 480 vehicles which are owned and operated by
independent contractors and we own 63 specialized heavy-haul trailers. We do
not employ any drivers used in our less-than-truckload operations, but
coordinate with regional transportation providers at transportation hubs to
provide local delivery and distribution services.
We maintain local trucking operations in Los Angeles, Oakland, Jacksonville,
Chicago, Memphis, Kansas City, Houston, Dallas and Baltimore. Pursuant to our
operations, we contract with independent contractors who control more than 300
trucks. We also maintain interchange agreements with all of the major steamship
lines, railroads and stacktrain operators. Our network of independent
contractors allows us to serve shippers, ocean carriers and freight forwarders
across the country to supply local transport requirements.
We provide truck brokerage services throughout North America through our
customer service centers in Los Angeles, Lafayette (California), Dallas,
Chicago, and East Rutherford (New Jersey). Truck brokerage involves the
arrangement by a broker of trucking services with a licensed independent
carrier on behalf of a shipper. We are currently expanding our truck brokerage
operation into a flexible, nationwide network of customer service centers
supplying freight to a core group of reliable carriers. This network provides a
cost efficient and convenient back-up service to handle surges in customers'
volume. Services provided by the network are managed by sophisticated
information systems.
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Logistics
We provide not only a broad range of traditional transportation related
services, such as trucking and intermodal marketing, but also an array of
logistics solutions which can be tailored to fit a particular customer's needs.
By optimizing the flow of goods through the supply chain and across a variety
of services, we can significantly reduce our customers' freight handling,
delivery and inventory costs. We currently offer logistics services such as
local trucking, transportation purchasing and management, distribution planning
and other specialized services. We believe that demand for value-added
logistics services will continue to grow as companies downsize and outsource
many of these functions to third parties.
As part of our logistics services, we offer a variety of freight handling
services, including consolidation/deconsolidation and warehousing. Our
logistics operation has prospered by focusing on providing customers with
specially designed transportation packages which fit the shipper's specific
transportation needs. Additionally, we have designed service packages intended
to reduce the shipper's handling requirements and improve inventory efficiency.
These services are primarily offered on the West Coast and we have recently
established additional regional freight handling facilities to meet the needs
of our customers.
Customers
Through our sales and customer service organizations and with the support of
our centralized pricing and logistics management systems, we market our
stacktrain services primarily to four customer segments:
. intermodal marketing companies;
. the automotive industry;
. ocean carriers; and
. shippers of refrigerated freight.
Our largest single stacktrain customer group consists of intermodal
marketing companies, such as Pacer Logistics, who sell intermodal service to
shippers while buying space on intermodal rail trains. Through our sales
network, and the sales networks of the intermodal marketing companies to which
we sell stacktrain services, we provide stacktrain services to more than 5,000
shippers such Sony, Ford Motor Company and Wal-Mart Stores. In addition, we
provide stacktrain services to APL Limited's in-house intermodal marketing
operation and its affiliated automotive logistics company. We are also
responsible for the handling of APL Limited's international container shipping
and for the repositioning of APL Limited's empty containers from the interior
to the West Coast of the United States so that they may be reused by APL
Limited in its international shipping operations.
Pacer Logistics currently provides services on a nationwide basis to
retailers and manufacturers. Pacer Logistics provides services to a number of
Fortune 500 companies, such as Kmart, Walt Disney and the Union Pacific
Railroad, several of which have been long-term customers of Pacer Logistics. A
significant portion of our sales obtained through Pacer Logistics are with
customers that utilize more than one service. For example, while we have
provided J.C. Penney with substantial local trucking services in Southern
California for several years, J.C. Penney has recently awarded us a new
agreement providing for freight consolidation and handling in Southern
California.
Competition
Our stacktrain business competes primarily with over-the-road full truckload
carriers, conventional intermodal movement of trailers-on-flatcars, and
containerized intermodal rail services offered directly by railroads.
Competition between our stacktrain business and truckload carriers is
particularly intense for shipments of freight over shorter distances. This is
primarily attributable to the fact that the competitive advantage of intermodal
transportation's low variable labor and fuel requirements per ton/mile is
diminished for
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shorter distance shipments. The major competitors of our stacktrain business
include Burlington Northern Santa Fe, Union Pacific, CSX Intermodal and J.B.
Hunt Transport.
The transportation services industry is highly competitive. Our intermodal
marketing, trucking and logistics business competes primarily against other
domestic non-asset-based transportation and logistics companies, asset-based
transportation and logistics companies, third-party freight brokers, private
shipping departments and freight forwarders. Competition is based primarily on
freight rates, quality of service (such as damage free shipments, on-time
delivery and consistent transit times), reliable pickup and delivery and scope
of operations. We also compete with transportation services companies for the
services of independent commission agents, and with trucklines for the services
of independent contractors and drivers. The major competitors of Pacer
Logistics include Hub Group, Mark VII, Alliance Shippers and C.H. Robinson.
Sales and Marketing
As of June 25, 1999 our stacktrain operations were marketed by 16 sales and
25 customer service representatives. These representatives operate through
seven regional and district sales offices and three regional service centers
which are situated in the major shipping locations for the stacktrain business
in order to provide support for the customers of the stacktrain business. The
16 sales representatives are directly responsible for the management of and
liaison with existing customers and for the solicitation of new business. The
customer service representatives are responsible for supporting existing
customers and sales representatives through, among other things, providing
cargo tracking services, responding to customer complaints and processing
customer inquiries. In addition, intermodal marketing companies are an
important link between our stacktrain operations and shippers. Intermodal
marketing companies, who sell intermodal service to shippers while buying space
on intermodal rail trains, enable us to market our services through their sales
networks and indirectly access shippers in more than 100 major metropolitan
areas.
As of June 25, 1999, Pacer Logistics' marketing operation included 242 sales
agents, 185 of which are independent sales agents, supported by regional sales
offices in 17 cities, including Los Angeles, Chicago, Atlanta, Seattle, Dallas
and Oakland. This sales force is primarily responsible for selling the services
offered by our Pacer Logistics business unit. Our salaried sales
representatives are deployed in major transportation hubs and target major
accounts, while commissioned sales agents located throughout the country
contribute additional business that enables us to meet our volume commitments
and balance traffic flows. A number of our sales agents focus on particular
industries and in many cases we dedicate personnel to service particular
customers. We also have a national network of commissioned sales agents,
strategically located in key metropolitan areas, who, in connection with our
trucking services, contact local customers, solicit business and move freight
in conjunction with central dispatch coordinators.
Information Technology
Through APL Limited, we operate our stacktrain business with highly
sophisticated computer systems that enable continuous tracking of cargo
containers, chassis and railcars throughout the intermodal system. These
systems also provide us with performance, utilization and profitability
indicators in all aspects of the stacktrain business. These information systems
create a competitive advantage for us as they increase the efficiency of our
intermodal operations and enable us to provide shippers with the level of
information which they increasingly demand as part of their freight management
operations. See "Certain Agreements."
We have also invested in information technology to support the operations of
Pacer Logistics. Our information systems which apply to both our stacktrain
business and the operations of Pacer Logistics are capable of providing a wide
range of communication alternatives, typically through the medium requested by
our customers. As such, employees are linked with each other and with customers
and carriers by telephone, facsimile, E-mail, the Internet and/or electronic
data interchange ("EDI"). This interconnection allows us to easily communicate
requirements and availability of equipment and volume, to confirm and bill
orders and to track shipments. In addition, we are able to track chassis,
trailers and containers and deploy that equipment to fulfill our customers'
shipping requirements.
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We believe that our strong track record of high quality service and
reliability evidences the sophistication and successful implementation of our
technology systems. Our information technology includes integrated software
packages geared toward ensuring that goods are delivered in the most timely and
cost effective manner. We use a variety of proprietary software to track
customer orders and cargo, generate management reports to meet federal highway
authority requirements and locate all containers, chassis and railcars
throughout our network. Our systems also contain timely information on rail,
drayage, and truck contract rates, perform accounting functions and generate
management reports and billing statements. Our technology provides us with
critical information regarding the flow of freight, rail schedules, and
equipment availability. Based on this information, we are better able to
deliver timely and efficient service to our customers and provide the railroads
with increased equipment utilization and balanced freight flows. Currently, our
technological efforts are primarily focused on reducing customer service
response time, enhancing the customer service profile database, and expanding
the number of customers and service providers with which we share data using
EDI applications.
Facilities/Equipment
Our stacktrain transportation network services a total of 67 locations
across North America. Our integrated rail network, combined with our equipment
fleet, enables us to provide our customers with single-company control over
rail transportation to locations throughout North America.
Substantially all of our terminals are owned by rail or highway carriers and
are managed on our behalf. However, full-time personnel work on-site at major
locations to ensure close coordination of the services provided at the
facilities. In addition to these terminals, other locations throughout the
eastern United States serve as stand-alone container depots, where empty
containers can be picked up or dropped off, or supply points, where empty
containers can be picked up only. In connection with our trucking services,
agents provide marketing and sales, terminal facilities and driver recruiting,
while an operations center provides, among other services, insurance, claims
handling, safety compliance, credit, billing and collection and operating
advances and payments to drivers and agents.
Our stacktrain equipment fleet consists of a large number double stack
railcars, containers and chassis which are owned or subject to short and long
term leases. As of June 25, 1999 our stacktrain equipment fleet consisted of
the following:
<TABLE>
<CAPTION>
Owned Leased Total
----- ------ ------
<S> <C> <C> <C>
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
===== ====== ======
</TABLE>
- --------
(/1/Represents)the current allocation of chassis sublet to us pursuant to the
terms of the TPI Chassis Sublet Agreement which was entered into between us
and APL Limited. See "Certain Agreements."
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Supplementing the equipment listed above we have access to an extensive
inventory of 20-, 40- and 45-foot containers from APL Limited's international
network in addition to the empty containers which we reposition on behalf of
APL Limited.
Pacer Logistics also owns a limited amount of equipment to support our
trucking operations. The majority of our trucking operations are conducted
through contracts with independent contractors who own and operate their own
equipment. Through Pacer Logistics, we lease two warehouses in Kansas City and
a facility in Los Angeles for dockspace, warehousing and parking for tractors
and trailers.
Suppliers
Railroads
We have long-term contracts with certain of the railroads regarding movement
of our stacktrains. In addition, the railroad contracts generally provide for
access to terminals controlled by the railroads as well as support services
related to our stacktrain operations. Through these contracts, our stacktrain
business has established a North American transportation network. Pacer
Logistics also maintains contracts with the railroads which govern the
transportation services and payment terms pursuant to which its intermodal
shipments are handled by the railroads. The Pacer Logistics contracts are
typically of short duration, usually twelve month terms, and subject to renewal
or extension. While there can be no assurance that Pacer Logistics' contracts
will be renewed, we have in the past successfully negotiated extensions of the
contracts with the railroads. We maintain close working relationships with all
of the major railroads in the United States and view each relationship as a
partnership. We will continue to focus our efforts on strengthening these
relationships.
Through our contracts with rail carriers, we have access to a 50,000 mile
rail network throughout North America. Our rail contracts, which generally
provide that the rail carriers will perform linehaul and terminal services for
us, are typically long-term agreements, with major contracts providing for a
remaining term of 13 to 15 years. Pursuant to the service provisions, the rail
carriers provide transportation of our stacktrains across their rail networks
and terminal services related to loading and unloading of containers, equipment
movement and general administration. Our rail contracts generally establish per
container rates for stacktrain shipments made on rail carriers' transportation
networks and typically provide that we are obligated to transport a certain
percentage of our total stacktrain shipments with each of the rail carriers.
The terms of our rail contracts, including rates, are generally subject to
adjustment or renegotiation throughout the term of the contract, based on
factors such as the continuing fairness of the contract terms, prevailing
market conditions and changes in the rail carriers' costs to provide rail
service. Generally, we have the benefit of advantageous rate provisions in our
rail contracts. Based upon these provisions, and the volume of freight which we
ship with each of the rail carriers, we believe that we enjoy favorable
transportation rates for our stacktrain shipments.
Independent Contractors
We rely on the services of independent agents and contractors in certain of
our transportation services. Although we own a small number of tractors and
trailers, the majority of our truck equipment and drivers are provided by
independent contractors and agents. Our relationships with independent
contractors allow us to provide customers with a broad range of trucking
services without the need to commit capital to acquire and maintain an asset
base. Although our agreements with independent contractors are typically long-
term in practice, they are generally terminable by either party on short
notice.
Independent contractors and fleet owners are compensated on the basis of
mileage rates and a fixed percentage of the revenue generated from the
shipments they haul. Under the terms of our typical lease contracts,
independent contractors must pay all the expenses of operating their equipment,
including driver wages and benefits, fuel, physical damage insurance,
maintenance and debt service.
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Local Trucking Companies
We have established a good working relationship with a large network of
local truckers in many major urban centers throughout the United States. The
quality of these relationships helps ensure reliable pickups and deliveries,
which is a major differentiating factor among intermodal marketing companies.
Our strategy has been to concentrate business with a select group of local
truckers in a particular urban area, which increases our economic value with
the local truckers, and in turn raises the quality of service that we receive.
Relationship with APL Limited
We have entered into a long-term agreement with APL Limited for the domestic
transportation on our stacktrain network of APL Limited's international
freight. The majority of APL Limited's imports to the United States are
transported on the stacktrain from ports on the West Coast to population
centers in the Midwest and Northeast regions. However, domestic stacktrain
freight which originates in the United States moves predominantly westbound
from eastern and midwestern production centers to consumption centers on the
West Coast. Because of our agreement with APL Limited, we are able to achieve
high utilization and steady revenue production from our intermodal equipment
due to our high volume of both eastbound and westbound shipments. The APL
Limited freight also significantly increases the stacktrain volume, thereby
improving our bargaining position with the railroads regarding contract terms.
In addition, we provide APL Limited with equipment repositioning services
through which we transport APL Limited's empty containers from destinations
within North America to their West Coast points of origin. To the extent we are
able to fill these empty containers with the westbound freight of other
stacktrain customers, we receive compensation from both APL Limited for our
repositioning service and from the other customers for shipment of their
freight. In addition to the foregoing, we are in the process of negotiating a
long-term agreement with APL Limited, pursuant to which APL Limited will
provide us with certain information technology services essential to our
stacktrain business. See "Certain Agreements."
Government Regulation
Regulation of Our Trucking and Stacktrain Operations
The transportation industry has been subject to legislative and regulatory
changes that have affected the economics of the industry by requiring changes
in operating practices or influencing the demand for, and cost of, providing
transportation services.
We are subject to licensing and regulation as a transportation provider
pursuant to our trucking operations. We are licensed by the Department of
Transportation as a national freight broker in arranging for the transportation
of general commodities by motor vehicle and operate pursuant to a 48-state,
irregular route common and contract carrier authority. The Department of
Transportation prescribes qualifications for acting in our capacity as a
national freight broker, including certain surety bonding requirements. We
provide motor carrier transportation services that require registration with
the Department of Transportation and compliance with certain economic
regulations administered by the Department of Transportation, including a
requirement to maintain insurance coverage in minimum prescribed amounts. Other
sourcing and distribution activities may be subject to various federal and
state food and drug statutes and regulations. Although Congress enacted
legislation in 1994 that substantially preempts the authority of states to
exercise economic regulation of motor carriers and brokers of freight, we and
several of our subsidiaries continue to be subject to a variety of vehicle
registration and licensing requirements. We and the carriers that we rely on in
arranging transportation services for our customers are also subject to a
variety of federal and state safety and environmental regulations.
Intermodal operations, like ours, were exempted from virtually all active
regulatory supervision by the Interstate Commerce Commission, predecessor to
the regulatory responsibilities now held by the federal Surface Transportation
Board. Such exemption is revocable by the Surface Transportation Board, but the
standards for revocation of regulatory exemptions issued by the Interstate
Commerce Commission or Surface Transportation Board are high.
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Regulation of Our Suppliers and Customers
We have a substantial number of customers who provide ocean carriage of
intermodal shipments. Ocean carriage is subject to regulation by the Federal
Maritime Commission and, to a lesser extent, by other agencies. The regulatory
regime applicable to ocean shipping was revised by the Ocean Shipping Reform
Act of 1998, which took effect May 1, 1999. It is unclear at this time to what
extent implementation of the Ocean Shipping Reform Act will affect the
competitiveness and/or efficiency of operations of our various ocean carrier
customers.
The Federal Maritime Commission is reported to be pursuing an investigation
at this time concerning alleged violations of statutory and regulatory
requirements by ocean carriers involved in the eastbound trans-Pacific trades
during the peak shipping season of 1998. The scope and focus of such
investigation and the remedies which may be imposed by the Federal Maritime
Commission based on its findings is presently unclear.
Litigation
A subsidiary of Pacer Logistics is a named defendant in a class action filed
in July, 1997 in the State of California, Los Angeles Superior Court, Central
District, alleging, among other things, breach of fiduciary duty, unfair
business practices and conversion in connection with monies allegedly
wrongfully deducted from truck drivers' earnings. The Pacer Logistics
subsidiary has entered into a Judge Pro Tempore Submission Agreement dated as
of October 9, 1998 pursuant to which the plaintiffs and defendants have waived
their rights to a jury trial, stipulated to a certified class and agreed to a
minimum judgment of $250,000 and a maximum judgment of $1.75 million to be
determined by a panel of three judges. Trial is scheduled to begin on August 9,
1999. To date, this action has not had a material negative impact on our
relationships with independent contractors, drayage companies or fleet owners.
We are currently not otherwise subject to any other pending or threatened
litigation other than routine litigation arising in the ordinary course of
business, none of which is expected to have a material adverse effect on our
business, financial condition or results of operations. Most of the lawsuits to
which we are a party are covered by insurance and are being defended by our
insurance carriers.
Environmental
We are subject to federal, state and local environmental regulations,
including regulations relating to permitting requirements, wastewater
discharges and underground storage tanks. We believe that we are in substantial
compliance with these requirements and that we currently have no material
environmental liabilities.
Where You Can Get More Information
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended, covering the notes to
be issued in the exchange offer. As permitted by the Commission rules, this
prospectus omits certain information included in the registration statement.
For further information pertaining to the notes, we refer you to the
registration statement, including its exhibits. Any statement made in this
prospectus concerning the contents of any contract, agreement or other document
is not necessarily complete. If we have filed any such contract, agreement or
other document as an exhibit to the registration statement, you should read the
exhibit for a more complete understanding of the document or matter involved.
Each statement regarding a contract, agreement or other document made in this
prospectus is not necessarily complete and you should refer to the exhibits
attached to the registration statement for a copy of the actual document. You
may read and copy any of the information we file with the Commission at the
Commission's public reference rooms at 1024, 450 Fifth Street, N.W.,
Washington, D.C., at 7 World Trade Center, 13th Floor, New York, New York
10048. You can also obtain copies of filed documents by mail from the public
reference section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. You may call the Commission at 1-
800-SEC-0330 for further information on the operation of the public reference
rooms. Filed documents are also available to the public at the Commission's web
site at http://www.sec.gov.
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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.
<TABLE>
<CAPTION>
Name Age Position with Pacer International
- ---- --- ---------------------------------
<S> <C> <C>
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
</TABLE>
Donald C. Orris has served as Chairman, President and Chief Executive
Officer of our company since May 1999. From Pacer Logistics' inception in March
1997 until May 1999, Mr. Orris served as Chairman, President and Chief
Executive Officer of Pacer Logistics. From March 1997 until May 1998, Mr. Orris
served as President and Chief Executive Officer of an affiliate of Pacer
Logistics. He also has served as Chairman of Pacer Logistics' other
subsidiaries since their formation or acquisition by Pacer Logistics. Mr. Orris
has been the President of Pacer International Consulting LLC (f/k/a Logistics
International LLC), a wholly owned subsidiary of Pacer Logistics, since
September 1996. From January 1995 to September 1996, Mr. Orris served as
President and Chief Operating Officer, and from 1990 until January 1995, he
served as an Executive Vice President, of Southern Pacific Transportation
Company. Mr. Orris was the President and Chief Operating Officer of American
President Domestic Company and American President Intermodal Company from 1982
until 1990.
Gerry Angeli has served as an Executive Vice President of our company since
May 1999. From Pacer Logistics' inception in March 1997 until May 1999, Mr.
Angeli served as an Executive Vice President and Assistant Secretary of Pacer
Logistics and as a director of Pacer Logistics from April 1998 until May 1999.
He also served as a director of each of Pacer Logistics' subsidiaries. Since
May 1998, Mr. Angeli has served as President and Chief Executive Officer and
Vice President of certain Pacer Logistics subsidiaries. Mr. Angeli also served
as a Vice President and Assistant Secretary of PMTC from March 1997 until May
1998. Since 1982, Mr. Angeli has served as President and Chief Executive
Officer of the Pacer division of PMTC and, concurrent therewith, from 1987
until December 1993, Mr. Angeli served as President and Chief Executive Officer
of Southern Pacific Motor Trucking, a wholly owned subsidiary of the Southern
Pacific Railroad.
Gary I. Goldfein has served as an Executive Vice President of our company
since May 1999. Mr. Goldfein served as an Executive Vice President and director
of Pacer Logistics from December 1997 until May 1999. He also served as a
director of each of Pacer Logistics' subsidiaries and as an officer of certain
Pacer Logistics subsidiaries since May 1998. Mr. Goldfein was a co-founder of
ICI and ICSI in 1972. From 1972 until December 1997, Mr. Goldfein served as
President and Treasurer of ICSI and IMCS and Vice President and Secretary of
ICI.
Robert L. Cross has served as an Executive Vice President of our company
since May 1999. Mr. Cross served as an Executive Vice President and Assistant
Secretary of Pacer Logistics and as an officer of certain Pacer Logistics
subsidiaries from Pacer Logistics' inception in March 1997 until May 1999. From
1991 until March 1997, Mr. Cross served as President of ABL-TRANS.
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Richard P. Hyland has served as an Executive Vice President of our company
since May 1999. Mr. Hyland served as an Executive Vice President of Pacer
Logistics and as an officer of certain Pacer Logistics subsidiaries from June
1998 until May 1999. Mr. Hyland is the founder of Cross Con and has served as
President of Cross Con since 1977.
Allen E. Steiner has served as an Executive Vice President of our company
since May 1999. Mr. Steiner served as an Executive Vice President of Pacer
Logistics from December 1997 until May 1999. Since May 1998, Mr. Steiner has
served as Executive Vice President of certain Pacer Logistics subsidiaries. Mr.
Steiner was a co-founder of ICI and ICSI in 1972. From 1972 until December
1997, Mr. Steiner served as President and Treasurer of ICI and Vice President
and Secretary of ICSI and IMCS.
Lawrence C. Yarberry has served as an Executive Vice President, Chief
Financial Officer and Treasurer of our company since May 1999. Mr. Yarberry
served as an Executive Vice President, Chief Financial Officer and Treasurer of
Pacer Logistics from May 1998 until May 1999. Mr. Yarberry served as a
consultant to Pacer Logistics from February 1998 until April 1998. From April
1990 until December 1997, Mr. Yarberry served as a Vice President of Finance of
Southern Pacific Transportation Company and was Vice President of Finance and
Chief Financial Officer of Southern Pacific Rail Corporation.
Joseph P. Atturio has served as a Vice President, Controller and Secretary
of our company since May 1999. Mr. Atturio served as Vice President and
Secretary of Pacer Logistics since its inception in March 1997 until May 1999.
Prior to joining Pacer Logistics, Mr. Atturio served as Comptroller of SPMT
from August 1988 until December 1993 and as a Vice President of SPMT from July
1992 until December 1993. From January 1994 until March 1997, he served as Vice
President and Comptroller of PMTC and served as a Regional Director of PMT Auto
Transport, a division of PMTC, from January 1986 until 1988.
Joshua J. Harris has served as a director of our company since May 1999. Mr.
Harris is a partner in Apollo Management and has served as an officer of
certain affiliates of Apollo Management since 1990. Prior to that time, Mr.
Harris was a member of the Mergers and Acquisitions Department of Drexel
Burnham Lambert Incorporated. Mr. Harris is also a director of Converse Inc.,
Florsheim Group Inc., NRT, Incorporated, SMT Health Services Inc., Breuners
Home Furnishings Corporation, Alliance Imaging, Inc. and Quality Distribution
Inc.
Bruce H. Spector has served as a director of our company since May 1999. Mr.
Spector has been a consultant to Apollo Advisors since 1992 and has been a
principal in Apollo Advisors since 1995. Prior to October 1992, Mr. Spector, a
reorganization attorney, was a member of the Los Angeles law firm of Stutman
Triester and Glatt. Mr. Spector is also a director of Telemundo Group, Inc.,
United International Holdings, Inc., Nexthealth, Inc., Vail Resorts, Inc. and
Metropolis Realty Trust, Inc.
Marc E. Becker has served as a director of our company since May 1999. Mr.
Becker has been associated with Apollo Management since 1996. Prior to that
time, Mr. Becker was employed by Smith Barney Inc. in the Financial
Entrepreneurs group within its Investment Banking division. Mr. Becker also
serves as a director of National Financial Partners Corporation.
Timothy J. Rhein has served as a director of our company since May 1999. Mr.
Rhein has been President and Chief Executive Officer of APL Limited since
October 1995. Mr. Rhein served as APL Limited's President and Chief Operating
Officer from July 1995 to October 1995. Prior to that, Mr. Rhein served as
President and Chief Executive Officer of APL Land Transport Services, Inc. from
May 1990 to October 1995 and President and Chief Operating Officer of American
President Lines, Ltd. from January 1987 to May 1990. Mr. Rhein has served as a
director of APL Limited since July 1990.
Director Compensation
Messrs. Harris, Spector, Becker and Rhein have each been granted an option
under the Pacer International, Inc. 1999 Stock Option Plan to purchase 6,000
shares of our common stock with an exercise price of $10 per share.
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Executive Compensation
Summary Compensation Table
<TABLE>
<CAPTION>
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
- --------------------------- ---- -------- ------- ------------ ----------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------
/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.
<TABLE>
<CAPTION>
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
---- ----------- -------- ------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
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......... -- -- -- --
</TABLE>
- --------
(/1/In)connection with the Pacer Logistics transaction, certain of the options
relating to Pacer Logistics preferred stock will convert to options to
purchase Pacer Logistics Series A Preferred Stock. See "Our Capital
Stock."
(/2/Based)upon end of year fair market value of $10 per share of common stock
and $9 per share of Pacer Logistics preferred stock.
Stock Option Plan
Our Board of Directors adopted the Pacer International, Inc. 1999 Stock
Option Plan in May 1999. The purpose of this plan is to further our growth and
success by permitting our employees, as well as employees of Pacer Logistics,
to acquire shares of our common stock and the preferred stock of Pacer
Logistics, in the case of employees of Pacer Logistics, thereby increasing
their personal interest in our growth and success and to provide a means of
rewarding outstanding contribution by these employees. With the exception of
the 562,861 incentive stock options which were rolled into this plan from the
PMT Holdings, Inc. 1997 Stock Option Plan and the Pacer International, Inc.
1998 Stock Option Plan, options subject to this plan do not qualify as
incentive stock options under the provisions of section 422 of the Internal
Revenue Code.
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No more than 1,793,747 shares may be issued pursuant to all option grants
under this plan. In the event of certain corporate reorganizations,
recapitalizations, or other specified corporate transactions affecting our
stock, this plan permits proportionate adjustments to the number and kinds of
shares subject to options and/or the exercise price of those shares.
All of our employees, as well as the employees of any of our subsidiaries,
as well as non-employee directors are eligible for option grants under this
plan. This plan is administered by a committee of our Board of Directors and,
except with respect to initial grants described below, such committee has the
power and authority to approve the persons to whom options are granted, the
time or times at which options are granted, the number of shares subject to
each option, the exercise price of each option and the vesting and
exercisability provisions of each option and has all powers with respect to the
administration and interpretation of this plan.
This plan provides for initial grants to specified employees. The aggregate
number of shares subject to these initial grants is 832,000 and their exercise
price is $10.00 per share. These initial grants are divided into three
tranches, Tranche A, Tranche B and Tranche C. Tranche A options vest in five
equal installments on the date of the grant's first five anniversary dates,
provided the employee is employed by us on each anniversary date. Tranche B
options generally vest on the date of grant's seventh anniversary date if the
employee is employed by us on that date. However, if on any of the grant's
first five anniversary dates certain per share target values are attained and
the employee is employed by us on that date, then 20% of the Tranche B options
will vest. Accelerated vesting of the Tranche B options is possible if a sale
of our company occurs prior to the date of grant's fifth anniversary and the
fair market value of the per share consideration to be received by the
shareholder equals or exceeds an amount calculated in accordance with this
plan. Tranche C options vest in substantially the same manner as Tranche B
options, including acceleration upon a sale of our company, except that the per
share target values as of a given anniversary date are increased. Options
granted to non-employee directors vest in four equal installments on the date
of grant's first four anniversary dates.
A vested option that has not yet been exercised will automatically terminate
on the first to occur of
(1) the grant's tenth anniversary,
(2) ninety days following the employee's service of employment for any
reason other than death or disability,
(3) twelve months following the employee's service of employment due to
death or disability, or
(4) as otherwise determined by the committee.
Each option that is vested as of the date of the sale of our company remains
exercisable until the sale's closing, after which time such option is
unenforceable. Non-vested Tranche A, Tranche B and Tranche C options will vest
in accordance with the vesting schedules described above, however, an option
that vests after our company is sold will remain exercisable for 10 days before
such portion of the option terminates and is of no further force or effect. All
options granted under this plan are nontransferable except upon death, by such
employee's will or the laws of descent and distribution, or transfers to family
members of the employee that are approved by the committee.
This plan has a term of ten years, subject to earlier termination by our
Board of Directors, who may modify or amend this plan in any respect, provided
that no amendment or modification affects an option already granted without the
consent of the option holder.
Employment and Related Agreements
We have entered into employment agreements dated as of March 31, 1997, and
amended as of April 7, 1999, with each of Donald C. Orris, Gerry Angeli and
Robert L. Cross and employment agreements dated as of December 16, 1997, and
amended as of April 7, 1999, with each of Gary I. Goldfein and Allen E.
Steiner. Each of these employment agreements, as amended, has a term of two
years commencing upon the closing of the Pacer Logistics transactions, with
automatic one year renewals on each anniversary of their commencement date. The
minimum base salary under these employment agreements is $225,000, $225,000,
$200,000, $235,000, and $220,000 per year for Messrs. Orris, Angeli, Cross,
Goldfein, and Steiner, respectively, subject to increase by our board of
directors, except in the case of Mr. Orris, in which case the base salary is
subject to increase as agreed to by Mr. Orris and our Board of Directors.
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Under the employment agreements of Messrs. Orris, Angeli and Cross, our
Board of Directors may award an annual bonus to the employee in an amount up to
$83,000 and under the employment agreements of Messrs. Goldfein and Steiner
such bonus may be in an amount up to $90,000. In each case, such bonus is based
on the attainment of certain operating income targets.
All of the employment agreements provide that if the employment of these
employees is terminated for any reason, they would be entitled to receive any
unpaid portion of their base salary, reimbursement for any expenses incurred
prior to the date of termination and any unpaid amounts earned prior to the
effective date of termination pursuant to the terms of any bonus or benefit
program in which they participated at the time of termination. In addition, the
employment agreements provide that if the employment of these employees is
terminated without "cause", as defined in the employment agreements, they would
be entitled to receive 100% of their base salary for a period of between twelve
and twenty-four months, with such amount to be reduced by 50% of any salary
earned during this severance period from other sources.
All of the employment agreements include certain restrictive covenants for
our benefit relating to the non-disclosure by these employees of our
confidential business information and trade secrets, the disclosure grant and
assignment of inventions and non-competition with regards to any business in
competition with us.
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CERTAIN AGREEMENTS
APL Limited Agreements
We have entered into, or have entered negotiations to enter into, agreements
with APL Limited and certain of its affiliates relating to our stacktrain
business. Except as otherwise described below, these agreements were entered
into simultaneously with the consummation of our recapitalization.
Non-Competition Agreement
Pursuant to a Non-Competition Agreement, Neptune Orient Lines Limited, APL
Limited, and their affiliates agreed not to compete with us, either through
ownership of, participation in management of, or by lending their respective
names to, any business involved in arranging stacktrain services for a period
of ten (10) years from the closing date of our recapitalization. Neptune Orient
Lines, APL Limited and their affiliates further agreed to refrain from
soliciting or recruiting any person employed by us as of the closing date of
our recapitalization for a period of ten (10) years.
Administrative Services Agreement
Pursuant to an Administrative Services Agreement, APL Limited provides us
with certain administrative and support services. We compensate APL Limited on
a per transaction basis and a headcount basis, as applicable. APL Limited
represented to us that the transaction fees contained in the Administrative
Services Agreement, when applied to the actual number of transactions in 1998,
would not result in figures substantially different from those reflected in the
audited financial results of Pacer International (f/k/a APL Land Transport
Services, Inc.) for the 1998 fiscal year. Furthermore, during the term of this
agreement, we have the right to audit, at our own expense, the total
expenditures presented by APL Limited.
The Administrative Services Agreement will expire one year from the closing
of our recapitalization or on such other date as may be mutually agreed upon by
us and APL Limited. Either party may terminate this agreement if the other
party defaults on the performance of its material obligations and such default
is not cured within thirty (30) days.
Information Technology Outsourcing and License Agreement
Pursuant to an IT Supplemental Agreement, dated as of May 11, 1999 by and
among APL Limited, Coyote Acquisition LLC and our Company, we are currently
completing negotiation of an Information Technology Outsourcing and License
Agreement based upon a term sheet agreed by the parties. If any party so
elects, the parties may enter into private mediation to finalize the
Information Technology Outsourcing and License Agreement. In the interim, the
Information Technology Outsourcing and License Agreement term sheet governs the
relationship between the parties regarding information technology.
The Information Technology Outsourcing and License Agreement term sheet
provides that, APL Limited will, for a period of twenty years, provide us with
all necessary software, licenses and related services necessary to conduct the
stacktrain business as it is now being conducted and as it is enhanced pursuant
to and during the term of the agreement. These services will, at a minimum,
include the same level of services provided to our company by APL Limited prior
to our recapitalization. APL Limited will also be responsible for obtaining,
maintaining, upgrading, and replacing any software, equipment, facilities or
personnel necessary in order to provide the services during the term of the
agreement. APL Limited will be required to provide personnel with the adequate
skills, experience and knowledge of our business to ensure that all information
technology systems are supported at previously existing levels, and as these
levels are subsequently enhanced. In addition, any software that relates solely
to our business will be transferred to us directly.
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In accordance with the Information Technology Outsourcing and License
Agreement term sheet we will have access to APL Limited's proprietary software
that is used to run the information systems through perpetual, worldwide,
royalty-free licenses granted to us by APL Limited. APL Limited will also
ensure that we are licensed to use all other software needed to operate the
systems. These rights will remain in place even after the agreement expires or
terminates and regardless of the reason for termination.
The Information Technology Outsourcing and License Agreement term sheet
provides that the services are tendered at what we believe are competitive
prices. The annual fee will be frozen during the first four years of the
agreement and will be increased nominally thereafter. In addition, for the
first five years we will be charged for costs related to increased usage of the
services only to the extent the increase exceeds certain specified growth
levels for the company and thereafter for all of our actual direct costs
related to volume growth.
The Information Technology Outsourcing and License Agreement term sheet also
provides that we will have the option to terminate the agreement for our
convenience at any point during the term, either in its entirety or on a
system-by-system basis, by giving 120 days' notice to APL Limited. In addition,
we may terminate if APL Limited fails to meet certain specified performance
standards or is in material breach of the agreement and fails to correct the
breach in a timely fashion. The agreement will also be terminable by APL
Limited, but only if we fail to meet our payment. However, should APL Limited
elect to terminate the agreement because we are acquired by a competitor of APL
Limited, APL Limited will be responsible for all costs related to establishing
us with a comparable service provider on a similar computer infrastructure. APL
Limited would also be responsible for the costs of transferring our systems if
we terminate the agreement for any of the following reasons:
(1) an uncorrected material breach by APL Limited;
(2) the occurrence of certain specified performance failures resulting from
APL Limited 's willful misconduct or gross negligence; or
(3) the occurrence of any two performance failures within a 12-month period,
regardless of the cause.
In the Information Technology Outsourcing and License Agreement term sheet
APL Limited has made customary representations and warranties to us, including,
that the information technology, software, hardware and services being provided
to us constitute all such items required to provide the information technology
services necessary to run our business and relating to Year 2000 compliance of
the software and hardware used in providing the services under the agreement.
APL Limited also indemnifies us against breaches of these representations,
losses resulting from claims brought by third parties alleging infringement of
their intellectual property and losses associated with a failure of the
information technology systems to operate that is either caused by APL Limited
or covered by indemnification or warranties provided to APL Limited by the
responsible third parties.
Stacktrain Services Agreement
Pursuant to a Stacktrain Services Agreement, we arrange and administer
inland intermodal rail transportation for APL Limited's international freight
shipments and its empty containers between points in the United States, between
points in Canada and between points in the United States and Canada. In
addition, we arrange and administer inland intermodal rail transportation for
any other volume tendered by APL Automotive Logistics and APL Intermodal
Management Services, each a division of APL Limited, between points in the
United States, Canada and Mexico. In connection with this agreement, APL
Limited agreed to tender to us all of its international shipments and
containerized freight for United States or Canadian rail movement and APL
Automotive Logistics and APL Intermodal Management Services will use their best
efforts to deliver their business to us for handling.
Each year, during the term of the Stacktrain Services Agreement, APL Limited
has agreed to pay us $6.6 million as a management fee. In addition, APL Limited
has agreed to pay us a fee for each container moved equal to the amount payable
by us to the underlying rail carrier for the movement of such containers. Any
savings received by us under the terms of our agreements with the underlying
rail carriers will be passed
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through on a dollar-for-dollar basis to APL Limited. We do not assess any
administrative fees against APL Limited for the movement of its containers.
APL Limited pays us for the repositioning of its empty containers. APL
Limited pays us a fee calculated based on established rates agreed upon by the
parties for each empty container of APL Limited that is repositioned by us.
The Stacktrain Service Agreement will expire twenty (20) years following the
closing date of our recapitalization. However, the term of the Stacktrain
Services Agreement will be extended in the event that the current agreement
between Pacer International and the Union Pacific Railroad Company, or its
successor, is extended. The effect of this provision is that the Stacktrain
Services Agreement and our agreement with the Union Pacific Railroad Company
will expire simultaneously.
TPI Chassis Sublet Agreement
Pursuant to a TPI Chassis Sublet Agreement, APL Limited sublets chassis to
us for use in the transport of international freight on the stacktrain network
on behalf of international shippers other than APL Limited. The number of
chassis to be sublet is determined according to a market plan which we deliver
to APL Limited prior to each year during the term of the TPI Chassis Sublet
Agreement. If our chassis requirements decrease from the current market plan
allocation and APL Limited does not absorb the additional chassis into its own
fleet, we are responsible for any early lease termination penalties incurred by
APL Limited. If our need for chassis increases beyond the current market plan
allocation, APL Limited will supply additional chassis to the extent they are
available for our use. The TPI Chassis Sublet Agreement provides that if we
consistently exceed our allocation of chassis under our market plan, or if APL
Limited consistently supplies less than such allocation, both parties will
promptly discuss the remedies for such an excess or shortage. The term of the
TPI Chassis Sublet Agreement will be the same as the term of the Stacktrain
Services Agreement. If the TPI Chassis Sublet Agreement is terminated prior to
twenty years from its execution, we may require APL Limited to assign the
leases for all of the chassis covered under the agreement to us. In addition,
during the first year of the agreement we may require APL Limited to assign to
us the leases for the chassis.
Equipment Supply Agreement
An Equipment Supply Agreement sets forth the mechanics of the supply of
containers and chassis from APL Limited to us for repositioning by us within
the interior United States. The containers and chassis which are subject to the
agreement are used by APL Limited in its international shipping operations.
Specifically, the Equipment Supply Agreement sets forth the underlying
interchanges of possession and supply points and return locations for the
repositioning of the containers and chassis. In addition, the Equipment Supply
Agreement sets forth the requirements for timely repositioning of the equipment
and charges which may be incurred by us for failing to reposition the equipment
in a timely manner. The Equipment Supply Agreement also sets forth certain
charges which may be incurred by us for damage to the containers and chassis
during repositioning. The Equipment Supply Agreement has the same term as the
Stacktrain Services Agreement.
Stock Purchase Agreement
Pursuant to the Stock Purchase Agreement, dated as of March 15, 1999, by and
between Coyote Acquisition LLC and APL Limited, we may be required to pay APL
Limited additional cash consideration of up to $15.0 million following our
recapitalization, in the event that Pacer International's EBITDA for the fiscal
year ending December 31, 1999 on an unconsolidated basis equals or exceeds
certain EBITDA targets set forth in the Stock Purchase Agreement. The EBITDA
targets set forth in the Stock Purchase Agreement exceed Pacer International's
historic results. Immediately prior to the closing of our recapitalization,
Coyote Acquisition assigned a small portion of its purchase rights under the
Stock Purchase Agreement to an affiliate, Coyote Acquisition II LLC, and to
certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse First
Boston Corporation. As a result of such assignment, and the exercise of such
assigned purchase rights, Coyote Acquisition II LLC owns 4.6% of our
outstanding common stock and certain affiliates of Deutsche Bank Securities
Inc. and Credit Suisse First Boston Corporation collectively own 2.9%, of our
outstanding common stock.
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Primary Obligation and Guaranty Agreement
We are a party to a Primary Obligation and Guaranty Agreement dated March
15, 1999, with Neptune Orient Lines Limited and Coyote Acquisition. The
Primary Obligation and Guaranty Agreement provides that, prior to an initial
public offering by APL Limited or certain of its affiliates, Neptune Orient
Lines will be directly liable for all of APL Limited's obligations under the
following agreements as if it had been a signatory thereto:
. Stacktrain Services Agreement;
. Administrative Services Agreement;
. Information Technology Outsourcing and License Agreement;
. TPI Chassis Sublet Agreement;
. Equipment Supply Agreement;
. our Shareholders' Agreement with Coyote Acquisition, Coyote Acquisition
II and APL Limited; and
. Stock Purchase Agreement.
Following an initial public offering of APL Limited or certain of its
affiliates, Neptune Orient Lines will guarantee any payments owed to us by APL
Limited. Such guarantee is subject to the requirement that we first exhaust
our rights to collect any guaranteed obligations from APL Limited, so long as
the collection efforts against APL Limited, in our judgment or the judgment of
Coyote Acquisition, do not prejudice in any manner the ability of Coyote
Acquisition and us to collect on the guarantee, in which case we and Coyote
Acquisition can proceed directly against Neptune Orient Lines. Neptune Orient
Lines' obligations will not be limited by any bankruptcy, insolvency, or
reorganization proceedings. The Primary Obligation and Guaranty Agreement will
terminate when all other agreements and all other guaranteed obligations are
terminated or satisfied.
Other Agreements
Shareholders' Agreements
We are a party to a Shareholders' Agreement with Coyote Acquisition, Coyote
Acquisition II and APL Limited which governs certain aspects of the
relationship between ourselves and our currently existing shareholders. The
Shareholders' Agreement contains, among other matters,
(1) a provision restricting the rights of APL Limited to transfer the
shares of Pacer International common stock, subject to certain
permitted or required transfers and a right of first refusal in favor
of Pacer International, Coyote Acquisition and Coyote Acquisition II;
(2) certain incidental registration rights in the event Pacer International
effects a registration of its common stock;
(3) certain participation rights that, when triggered, permit APL Limited
to participate, on a pro rata basis, in a sale by Coyote Acquisition
and Coyote Acquisition II of Pacer International common stock held by
them; and
(4) certain bring along rights that, when triggered, permit Coyote
Acquisition and Coyote Acquisition II to require APL Limited to
transfer an equivalent portion of Pacer International common stock held
by it.
The Shareholders' Agreement will terminate upon the earlier of:
(a) the tenth anniversary thereof; or
(b) such time as Pacer International is a public company with equity
securities listed on a national securities exchange or publicly
traded in the over-the-counter market and Coyote Acquisition and
Coyote Acquisition II shall have sold, in the aggregate, pursuant
to one or more offerings a total of fifty percent (50%) of the
total shares of Pacer International common stock held by it.
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We are a party to Shareholders' Agreements with
(1) certain members of Pacer Logistics management, Coyote Acquisition and
Coyote Acquisition II and
(2) certain affiliates of Credit Suisse First Boston Corporation and
Deutsche Bank Securities Inc. and Coyote Acquisition and Coyote Acquisition II.
The terms of such Shareholders' Agreements are substantially similar to those
set forth above.
Apollo Registration Rights Agreement
In addition to the Shareholders' Agreements, we entered into a separate
Registration Rights Agreement with certain affiliates of Apollo Management
pursuant to which such affiliates obtained certain demand and incidental
registration rights. As a result, at Apollo Management's written request, we
are obliged to prepare and file a registration statement covering the shares so
requested to be registered by Apollo Management. In addition, should we propose
to register any of our own common stock for sale to the public, Apollo
Management has the opportunity to include its common stock in the same or
concurrent registration statement filed by us. We will bear all expenses, with
the exception of selling expenses, incurred in the registration process.
Apollo Management Agreement
We have entered into a Management Agreement with Apollo Management. Under
the terms of the Management Agreement, we appointed Apollo Management to
provide financial and strategic advice to us. Pursuant to the terms of the
Management Agreement, Apollo Management has agreed to provide us with financial
and strategic services as our board of directors may reasonably request. As
consideration for services rendered and to be rendered under the Management
Agreement, we will pay Apollo an annual fee of $500,000 until termination of
the Management Agreement. In addition, we may pay Apollo Management a
transaction fee for any purchase, sale, recapitalization or similar transaction
completed by us, whether by merger, stock purchase or sale, asset purchase or
sale or otherwise. The Management Agreement may be terminated upon 30 days'
written notice by either party to the other party thereto. In connection with
our recapitalization we have paid Apollo Management a fee of $1,500,000.
Tax Sharing Agreement
Coyote Acquisition, Pacer International, Pacer Logistics, and the direct and
indirect subsidiaries of Pacer International and Pacer Logistics entered into a
Tax Sharing Agreement. The Tax Sharing Agreement generally contemplates that
two or more of the parties to the Tax Sharing Agreement may become members of
an affiliated group that files a consolidated federal income tax return for
U.S. federal income tax purposes and, perhaps, one or more consolidated,
combined or unitary groups for state, local and/or foreign tax purposes. The
Tax Sharing Agreement provides, among other things, methods for allocating the
tax liability of an affiliated group among its members, for reimbursing Coyote
Acquisition, or another entity as appropriate, for the payment of an affiliated
group's tax liability, and for reimbursing members of an affiliated group for
the use of net operating losses and other tax benefits that reduce an
affiliated group's tax liability otherwise payable.
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STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the anticipated
beneficial ownership of shares of the common stock immediately following the
recapitalization by each person anticipated to be the owner of 5% or more of
the common stock, by each person who is a director or executive officer of our
company and by all directors and executive officers of our company as a group.
The following table does not include the ownership by certain directors and
executives of the Pacer Logistics 7.5% Exchangeable Preferred Stock.
<TABLE>
<CAPTION>
Common Stock(/1/)
---------------------
Number Percentage
of Shares of Class
---------- ----------
<S> <C> <C>
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%
</TABLE>
- --------
(1) The amounts and percentage of common stock beneficially owned are
reported on the basis of regulations of the SEC governing the determination
of beneficial ownership of securities. Under the rules of the SEC, a person
is deemed to be a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities of which that person has
a right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed a beneficial owner of the same
securities and a person may be deemed a beneficial owner of securities as
to which he has no economic interest.
(2) Through its interest in Coyote Acquisition LLC and Coyote Acquisition II
LLC, Apollo Management IV, L.P. is deemed to beneficially own all of the
shares of common stock owned by Coyote Acquisition LLC and Coyote
Acquisition II LLC. Coyote Acquisition LLC owns 8,912,000 shares, or 85.3%,
of our outstanding common stock. Coyote Acquisition II LLC owns 478,000
shares, or 4.6%, of our outstanding common stock.
(3) Includes 34,833 shares of common stock issuable upon the exercise of
presently exercisable options held by the stockholder. Does not include an
additional 100,000 options and an additional 121,916 options which vest in
the future or 2,329.25 shares of the Pacer Logistics 7.5% Exchangeable
Preferred Stock held by the stockholder.
(4) Includes 34,833 shares of common stock issuable upon the exercise of
presently exercisable options held by the stockholder. Does not include an
additional 100,000 options and an additional 121,916 options which vest in
the future or 2,264.16 shares of the Pacer Logistics 7.5% Exchangeable
Preferred Stock held by the stockholder.
(5) Does not include 100,000 options which vest in the future or 4,963.75
shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the
stockholder.
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(6) Includes 34,833 shares of common stock issuable upon the exercise of
presently exercisable options held by the stockholder. Does not include an
additional 100,000 options and an additional 121,916 options which vest in
the future or 2,264.16 shares of the Pacer Logistics 7.5% Exchangeable
Preferred Stock held by the stockholder.
(7) Does not include 100,000 options which vest in the future or 5,956.5
shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the
stockholder.
(8) Does not include 100,000 options which vest in the future or 4,963.75
shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the
stockholder.
(9) Includes 11,000 shares of common stock issuable upon the exercise of
presently exercisable options held by the stockholder. Does not include an
additional 22,000 options which vest in the future.
(10) Includes 19,582 shares of common stock issuable upon the exercise of
presently exercisable options held by the stockholder. Does not include an
additional 9,781 options which vest in the future.
(11) Messrs. Harris, Spector and Becker are each principals and/or employees
of certain affiliates of Apollo Management IV, L.P. Accordingly, each such
person may be deemed to beneficially own shares of common stock held by
Apollo Management IV, L.P. Each such person disclaims beneficial ownership
of any such shares in which he does not have a pecuniary interest.
(12) Mr. Rhein is President, Chief Executive Officer and a director of APL
Limited. Accordingly, he may be deemed to beneficially own shares of common
stock held by APL Limited. Mr. Rhein disclaims beneficial ownership of any
such shares in which he does not have a pecuniary interest.
(13) The business address for Messrs. Orris, Angeli, Goldfein, Cross, Hyland,
Steiner, Yarberry and Atturio is Pacer International, Inc., 1340 Treat
Boulevard, Suite 200, Walnut Creek, CA 94596.
(14) The business address for Messrs. Harris and Becker is Apollo Management
L.P., 1301 Avenue of the Americas, New York, NY 10019.
(15) The business address for Mr. Spector is Apollo Management L.P., 1999
Avenue of the Stars, Suite 1900, Los Angeles, CA 90067.
(16) The business address for Mr. Rhein is APL Limited, 1111 Broadway,
Oakland, CA 94607.
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OUR CAPITAL STOCK
We have a total of 21 million shares of authorized capital stock of which 20
million shares, no par value, are of a class designated as "common stock" and 1
million shares, par value $.01 per share, are of a class designated as
"preferred stock." Pacer Logistics authorized a total of 11 million shares of
capital stock of which 10 million shares, par value $.01 per share are
designated as "common stock" and 1 million shares, par value $.01 per share,
are of a class designated as "preferred stock". Pacer Logistics has two series
of preferred stock. The designation, assigned values, preferences and relative,
participating, optional or other rights, qualifications, limitations or
restrictions on such preferred stock are described in full in their respective
Certificates of Designation.
Each share of common stock of Pacer International and Pacer Logistics
entitles the holder thereof to one vote at every annual or special meeting of
the stockholders of such company. There is no cumulative voting.
Shares of preferred stock of each company may be issued from time to time,
in one or more series, with such designation, assigned values, preferences and
relative, participating, optional or other rights, qualifications, limitations
or restrictions thereof as the Board of Directors of Pacer International or
Pacer Logistics, as the case may be, from time to time may adopt by resolution.
Each series shall consist of such number of shares as shall be stated and
expressed in such resolution or resolutions providing for the issuance of the
stock of such series. All shares of any one series of preferred stock shall be
identical.
No holder of shares of our capital stock or Pacer Logistics capital stock
shall have any preferential or preemptive right to subscribe for, purchase or
receive any share of our stock or Pacer Logistics stock, as the case may be,
any options or warrants for such shares, any rights to subscribe to or purchase
such shares or any securities which may at any time or from time to time be
issued, sold or offered for sale by us or Pacer Logistics, as the case may be.
The following description is a summary of the material terms of each series
of preferred stock, but does not restate the Certificates of Designation in
their entirety.
7.5% Exchangeable Preferred Stock
24,300 of Pacer Logistics' 1 million authorized shares of preferred stock
are designated "7.5% Exchangeable Preferred Stock." The 24,300 shares of 7.5%
Exchangeable Preferred Stock were issued to certain management shareholders of
Pacer Logistics in connection with the Pacer Logistics transaction. The
remainder have been reserved for issuance by Pacer Logistics as payment-in-kind
dividends. Except as otherwise required by law, or as stated below, shares of
exchangeable preferred stock are not entitled to voting rights.
Liquidation Preference
The exchangeable preferred stock has a liquidation preference of $1,000 per
share, plus accrued and unpaid dividends thereon. In addition, holders of the
preferred stock are entitled to an amount per share equal to 5% of the total
assets available for distribution to equity holders divided by the number of
shares of preferred stock outstanding.
Dividends
Dividends payable per share of the exchangeable preferred stock are equal to
the greater of:
(1) 7.5% of the $1,000 liquidation preference per share payable annually
in arrears in additional shares of the exchangeable preferred stock or
(2) an amount equal to 10% of the aggregate of certain dividends paid on
the Pacer Logistics common stock divided by the number of outstanding
shares of Pacer Logistics preferred stock, payable annually in arrears in
cash.
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Voluntary Exchange
At any time at least 15 months after, but before 24 months following the
closing of our recapitalization, each holder of the exchangeable preferred
stock has the right to exchange its shares into shares of Pacer International
common stock at a 15% premium. As a condition to the exchange of such preferred
stock, each holder will be required to become a party to the Shareholders'
Agreement and will be bound by all of the terms and conditions of the
Shareholders' Agreement as though such persons were original parties thereto.
Upon joining in the Shareholders' Agreement, such persons will have the same
rights and responsibilities as those of APL Limited, as set forth in the
Shareholders' Agreement.
Purchase Right
At any time at least 15 months after the closing of our recapitalization,
the exchangeable preferred stock may be purchased by Pacer International for
newly issued shares of preferred stock of Pacer International or cash. Our
credit agreement and the indenture governing the notes generally prohibits us
from purchasing the exchangeable preferred stock for cash for the initial 15
month time period. The Pacer International preferred stock has a 7.5% dividend,
payable in shares of such preferred stock and is mandatorily redeemable by
Pacer International on the tenth anniversary of issue.
Change of Control
Upon a change of control, each holder of exchangeable preferred stock shall
have the right to exchange the shares of exchangeable preferred stock held by
such holder for Pacer International common stock at the ratio set forth in the
Certificate of Designation multiplied by the following applicable premium which
shall be allocated pro rata on a monthly basis:
<TABLE>
<S> <C>
Prior to the End of Year 1....... 115.00%
End of Year 1.................... 106.75%
End of Year 2.................... 100.00%
</TABLE>
Voting Provisions
Except as required by law and except for matters which affect the rights and
preferences of the exchangeable preferred stock, the exchangeable preferred
stock is not entitled to vote on any matter submitted to a vote of the
stockholders of Pacer Logistics.
If (1) the voluntary exchange of 7.5% Exchangeable Preferred Stock by the
holders thereof for Pacer International common stock or (2) the purchase of
such preferred stock by Pacer International as contemplated above does not
occur, Mr. Orris and other members of our senior management team will remain
holders of the 7.5% Exchangeable Preferred Stock.
Series A Preferred Stock
In addition to the foregoing, Pacer Logistics has outstanding options to
purchase 44,997 shares of its Series A Preferred Stock. No shares of Series A
Preferred Stock are currently outstanding. Such options are exercisable at
$9.00 per share and are redeemable by Pacer Logistics at $9.00 per share.
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<PAGE>
DESCRIPTION OF OUR CREDIT AGREEMENT
In connection with the private offering, we entered into a credit agreement
with a syndicate of financial institutions. Our credit agreement provides for
the following:
(1) a seven-year $135.0 million term loan which was used to finance in
part our recapitalization and certain related costs and expenses, and to
refinance certain indebtedness of our company; and
(2) a five-year $100.0 million revolving credit facility, which may
include letters of credit (subject to a sublimit to be determined), to be
used for, among other things, working capital and general corporate
purposes of our company and its subsidiaries, including, without
limitation, effecting certain permitted acquisitions.
Prepayments
The loans under the term loan facility are required to be prepaid with, and
after the repayment in full of such loans, permanent reductions to the
revolving credit facility are required in an amount equal to,
(a) 100.0% (or a lesser percentage determined based upon the achievement
of certain financial ratios) of the net cash proceeds of all asset sales
and dispositions by our company and its subsidiaries, subject to certain
exceptions,
(b) 100.0% (or a lesser percentage determined based upon the achievement
of certain financial ratios) of the net cash proceeds of issuances of
certain debt obligations and certain preferred stock by our company and its
subsidiaries, subject to certain exceptions,
(c) 50.0% (or a lesser percentage determined based upon the achievement
of certain financial ratios) of the net cash proceeds from common equity
and certain preferred stock issuances by our company and its subsidiaries,
subject to certain exceptions, including in connection with permitted
acquisitions,
(d) 75.0% (or a lesser percentage determined based upon the achievement
of certain financial ratios) of annual Excess Cash Flow (as defined in our
credit agreement) and
(e) 100.00% of certain insurance proceeds, subject to certain
exceptions.
Such mandatory prepayments and permanent reductions will be allocated first,
to the term loan facility and second, to the revolving credit facility. Our
credit agreement requires our company to make annual amortization payments
(payable in quarterly installments) in respect of the term loan facility.
Voluntary prepayments and commitment reductions are permitted in whole or in
part, subject to minimum prepayment or reduction requirements, without premium
or penalty, provided that voluntary prepayments of certain loans on a date
other than the last day of the relevant interest period are subject to payment
of customary breakage costs, if any.
Interests and Fees
The interest rates under the our credit agreement are as follows:
(1) At our option, the interest rate on our term loan facility is (a)
2.00% in excess of the base rate equal to the higher of (x) 1/2 of 1.0% in
excess of the federal funds rate or (y) the rate that Bankers Trust Company
as the administrative agent announces from time to time as its prime
lending rate, as in effect from time to time, and (b) 3.00% in excess of
the Eurodollar rate for Eurodollar Loans (as defined in our credit
agreement), in each case, subject to increases or decreases based upon the
achievement of certain financial ratios; and
(2) At our option, the interest rate on our revolving credit facility is
(a) 1.50% in excess of the base rate equal to the higher of (x) 1/2 of 1.0%
in excess of the federal funds rate or (y) the rate that Bankers
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Trust Company, as the administrative agent announces from time to time as
its prime lending rate, as in effect from time to time and (b) 2.50% in
excess of the Eurodollar rate for Eurodollar Loans, in each case, subject
to increases or decreases based upon the achievement of certain financial
ratios.
We may elect interest periods of 1, 2, 3 or 6 months or to the extent
available to each lender with loans and/or commitments under the term loan
facility or the revolving credit facility, 9 or 12 months for Eurodollar Loans
under the applicable term loan or the revolving credit facility. With respect
to Eurodollar Loans, interest is payable at the end of each interest period
and, in any event, at least every 3 months. With respect to Base Rate Loans
(as defined in our credit agreement), interest is payable quarterly on the
last business day of each fiscal quarter. In each case, calculations of
interest are based on a 360-day year and actual days elapsed.
Our credit agreement provides for payment by our company in respect of
outstanding letters of credit of:
(1) an annual fee equal to the applicable margin over the Eurodollar
rate for Eurodollar Loans under the revolving credit facility from time to
time in effect on the aggregate outstanding stated amounts of such letters
of credit;
(2) a fronting fee equal to 1/4 of 1.0% on the aggregate outstanding
stated amounts of such letters of credit; and
(3) customary administrative charges.
We pay a commitment fee equal to a percentage equal to 1/2 of 1.0% per
annum on the undrawn portion of the available commitment under the revolving
credit facility, subject to decreases based on the achievement of certain
financial ratios and subject to increases based on the amount of unused
commitments under the revolving credit facility.
Collateral and Guarantees
The loans and letters of credit under our credit agreement are guaranteed
by all of our existing and future direct and indirect wholly-owned
subsidiaries. Our obligations and the obligations of such subsidiaries are
secured by a first priority perfected lien on substantially all of our
properties and assets and all of the properties and assets of such
subsidiaries, whether such properties and assets are now owned or subsequently
acquired, subject to certain exceptions. The security includes a pledge of all
capital stock and notes owned by us and such subsidiaries, provided that, in
certain cases, no more than 66 2/3% of the stock of our foreign subsidiaries
was required to be pledged.
Representations and Warranties and Covenants
Our credit agreement and related documentation contains certain customary
representations and warranties by our company and its subsidiaries. In
addition, our credit agreement contains customary covenants restricting our
ability and the ability of certain of our subsidiaries to, among other things:
. declare dividends;
. prepay debt;
. incur liens;
. make investments;
. incur additional indebtedness;
. amend certain organizational, corporate and other documents;
. make capital expenditures;
. engage in mergers, acquisitions and asset sales;
. engage in certain transactions with affiliates and formation of
subsidiaries; and
. issue redeemable common stock and preferred stock, subject to certain
exceptions.
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In addition, we are required to comply with specified financial covenants
and customary affirmative covenants.
Events of Default
Events of default under our credit agreement include:
. our failure to pay principal or interest when due or pay a reimbursement
obligation on a letter of credit;
. a material breach of any representation or warranty;
. covenant defaults;
. events of bankruptcy;
. a change of control of our company; and
. other customary events of default.
The above summary highlights the material provisions of our credit
agreement, but does not purport to be complete and is subject to, and is
qualified in its entirety by, all the provisions of our credit agreement, a
copy of which is available upon request to our company.
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DESCRIPTION OF NOTES
You can find definitions of certain terms used in this description under the
subheading "--Certain Definitions." In this description, the words "Pacer
International" refer only to Pacer International, Inc. and not to any of its
subsidiaries.
The notes were issued under an indenture dated as of May 28, 1999 by and
among Pacer International, the Guarantors and Wilmington Trust Company as
trustee. The following summary highlights certain material terms of the
indenture. Because this is a summary, it does not contain all of the
information that is included in the indenture. You should read the entire
indenture, including the definitions of certain terms used below, because it,
and not this summary, defines your rights as holders of the notes. The
indenture is subject to and governed by the Trust Indenture Act of 1939, as
amended. We have filed a copy of the indenture as an exhibit to the
registration statement of which this prospectus forms a part.
General
The notes will be general unsecured obligations of Pacer International,
ranking subordinate in right of payment to all existing and future Senior Debt
of Pacer International.
The notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof.
Initially, the Trustee will act as Paying Agent and Registrar for the Notes.
The Notes may be presented for registration or transfer and exchange at the
offices of the Registrar, which initially will be the Trustee's corporate trust
office. Pacer International may change any Paying Agent and Registrar without
notice to holders of the Notes.
Pacer International will pay principal, and premium, if any, on the notes at
the Trustee's corporate office in New York, New York. At Pacer International's
option, interest may be paid at the Trustee's corporate trust office or by
check mailed to the registered address of holders of the notes.
Any old notes that remain outstanding after completion of the exchange
offer, together with the exchange notes issued in connection with the exchange
offer, will be treated as a single class of securities under the Indenture.
Principal, Maturity and Interest
The notes will mature on June 1, 2007. Additional notes in an unlimited
amount may be issued under the indenture from time to time, subject to the
limitations set forth under "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness."
Interest on the notes will be payable semi-annually in cash on each June 1
and December 1, commencing on December 1, 1999, to the persons who are
registered Holders at the close of business on the May 15 and November 15
immediately preceding the applicable interest payment date. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from and including the date of issuance and will
be computed on the basis of a 360-day year of twelve 30-day months.
The notes will not be entitled to the benefit of any mandatory sinking fund.
Redemption
Optional Redemption
Pacer International may redeem the notes, in whole at any time or in part
from time to time, on and after June 1, 2003, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices
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(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:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.......................................................... 105.875%
2004.......................................................... 102.938%
2005 and thereafter........................................... 100.000%
</TABLE>
Optional Redemption upon Equity Offerings
At any time, or from time to time, on or prior to June 1, 2002, Pacer
International may, at its option, use the net cash proceeds of one or more
Equity Offerings (as defined below) to redeem up to 35% in aggregate principal
amount of the notes originally issued under the indenture at a redemption price
equal to 111.750% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided, however, that
after any such redemption the aggregate principal amount of the notes
outstanding must equal at least 65% of the aggregate amount of the notes
originally issued under the indenture. In order to effect the foregoing
redemption with the net cash proceeds of any Equity Offering, Pacer
International shall make such redemption not more than 120 days after the
consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a public or
private sale of Qualified Capital Stock, other than public offerings with
respect to the Company's Common Stock on Form S-8, of Pacer International.
Optional Redemption upon Change of Control
In addition, at any time prior to June 1, 2003, upon the occurrence of a
Change of Control, Pacer International may redeem the notes, in whole but not
in part, at a redemption price equal to the principal amount thereof plus the
Applicable Premium plus accrued and unpaid interest, if any, to the date of
redemption. Notice of redemption of the notes pursuant to this paragraph shall
be mailed to holders of the notes not more than 30 days following the
occurrence of a Change of Control. Pacer International may not redeem notes
pursuant to this paragraph if it has made an offer to repurchase notes with
respect to such Change of Control.
Selection and Notice of Redemption
In the event that less than all of the notes are to be redeemed at any time,
selection of such notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such notes are listed or, if such notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate; provided, however, that no
notes of a principal amount of $1,000 or less shall be redeemed in part;
provided, further, that if a partial redemption is made with the net cash
proceeds of an Equity Offering, selection of the notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as
nearly a pro rata basis as is practicable, subject to DTC procedures, unless
such method is otherwise prohibited.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address. If any note is to be redeemed in part only,
the notice of redemption that relates to such note shall state the portion of
the principal amount thereof to be redeemed. A new note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original note. On and after the
redemption date, interest will cease to accrue on notes or portions thereof
called for redemption as long as Pacer International has deposited with the
Paying Agent funds in satisfaction of the applicable redemption price pursuant
to the Indenture.
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Subordination
The payment of all Obligations on or relating to the notes is subordinated
in right of payment to the prior payment in full in cash or Cash Equivalents
of all Obligations on Senior Debt of Pacer International, including the
Obligations with respect to the Credit Agreement.
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents of all Obligations due in respect of Senior Debt,
including interest after the commencement of any bankruptcy or other like
proceeding at the rate specified in the applicable Senior Debt whether or not
such interest is an allowed claim in any such proceeding, before the holders
of notes will be entitled to receive any payment or distribution of any kind
or character with respect to any Obligations on, or relating to, the notes in
the event of any distribution to creditors of Pacer International:
(1) in a liquidation or dissolution of Pacer International;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Pacer International or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of Pacer International's assets and liabilities.
Pacer International also may not make any payment or distribution of any
kind or character with respect to any Obligations on, or relating to, the
notes or acquire any notes for cash or property or otherwise if:
(1) a payment default on any Senior Debt occurs and is continuing; or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Representative of any Designated Senior Debt.
Payments on and distributions with respect to any Obligations on, or with
respect to, the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of
(x) the date on which all nonpayment defaults are cured or waived (so
long as no other event of default exists),
(y) 180 days after the date on which the applicable Payment Blockage
Notice is received or
(z) the date on which the Trustee receives notice from the
Representative for such Designated Senior Debt rescinding the Payment
Blockage Notice, unless the maturity of any Designated Senior Debt has
been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 90 consecutive days,
it being acknowledged that any subsequent action, or any breach of any
financial covenants for a period commencing after the date of delivery of such
initial Payment Blockage Notice that in either case would give rise to a
default pursuant to any provisions under which a default previously existed or
was continuing shall constitute a new default for this purpose.
Pacer International must promptly notify holders of Senior Debt if payment
of the notes is accelerated because of an Event of Default.
By reason of such subordination, in the event of the insolvency of Pacer
International, creditors of Pacer International who are not holders of Senior
Debt, including the Holders of the notes, may recover less, ratably, than
holders of Senior Debt.
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After giving effect to the Transactions, on a pro forma basis, at April 2,
1999, Pacer International would have had approximately $135.0 million of
Senior Debt outstanding (exclusive of $100.0 million of unused commitments
under the Credit Agreement).
Guarantees
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each holder of notes and the Trustee, the full and
prompt performance of Pacer International's obligations under the indenture
and the notes, including the payment of principal of and interest on the
notes. The Guarantees will be subordinated to Guarantor Senior Debt on the
same basis as the notes are subordinated to Senior Debt. The obligations of
each Guarantor are limited to the maximum amount which, after giving effect to
all other contingent and fixed liabilities of such Guarantor (including,
without limitation, its Guarantor Senior Debt) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the indenture, will result in
the obligations of such Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to
Pacer International or another Guarantor without limitation, or with other
Persons upon the terms and conditions set forth in the indenture. See "Certain
Covenants--Merger, Consolidation and Sale of Assets." In the event all of the
Capital Stock of a Guarantor is disposed of by Pacer International, whether by
merger, consolidation, sale or otherwise, and the disposition complies with
the provisions set forth in "Certain Covenants--Limitation on Asset Sales,"
the Guarantor's Guarantee will be released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to Pacer
International's obligations pursuant to the notes, and the aggregate net
assets, earnings and equity of the Guarantors and Pacer International are
substantially equivalent to the net assets, earnings and equity of Pacer
International on a consolidated basis.
Change of Control
The indenture provides that upon the occurrence of a Change of Control,
each holder of notes will have the right to require that Pacer International
purchase all or a portion of such holder's notes pursuant to the offer
described below (the "Change of Control Offer"), at a purchase price equal to
101.0% of the principal amount thereof plus accrued interest to the date of
purchase.
The indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control (as
defined below), Pacer International covenants to:
(1) repay in full and terminate all commitments under Indebtedness under
the Credit Agreement and all other Senior Debt the terms of which require
repayment upon a Change of Control or offer to repay in full and terminate
all commitments under all Indebtedness under the Credit Agreement and all
other such Senior Debt and to repay the Indebtedness owed to each lender
which has accepted such offer; or
(2) obtain the requisite consents under the Credit Agreement and all
other Senior Debt to permit the repurchase of the notes as provided below.
Pacer International shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase notes pursuant to
the provisions described below. Pacer International's failure to comply with
the covenant described in the second preceding sentence (and any failure to
send the notice referred to in the succeeding paragraph as a result of the
prohibition in the second preceding sentence) shall constitute an Event of
Default described in clause (3) and not in clause (2) under "Events of
Default" below.
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Within 30 days following the date upon which the Change of Control occurred,
Pacer International shall send, by first class mail, a notice to each holder of
notes, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 60 days
from the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders of notes electing to have a note
purchased pursuant to a Change of Control Offer will be required to surrender
the note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third business day prior to
the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that Pacer
International will have available funds sufficient to pay the Change of Control
purchase price for all the notes that might be delivered by holders thereof
seeking to accept the Change of Control Offer. In the event Pacer International
is required to purchase outstanding notes pursuant to a Change of Control
Offer, Pacer International expects that it would seek third party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that Pacer International would be able to
obtain such financing.
Neither the Board of Directors of Pacer International nor the Trustee may
waive the covenant relating to a note holder's right to redemption upon a
Change of Control. Restrictions in the indenture described herein on the
ability of Pacer International and its Restricted Subsidiaries to incur
additional Indebtedness, to grant liens on its property, to make Restricted
Payments and to make Asset Sales may also make more difficult or discourage a
takeover of Pacer International, whether favored or opposed by the management
of Pacer International. Consummation of any such transaction in certain
circumstances may require redemption or repurchase of the notes, and there can
be no assurance that Pacer International or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout
of Pacer International or any of its Restricted Subsidiaries by the management
of Pacer International. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the indenture may not afford the holders of notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
Pacer International will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the indenture, Pacer International shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of "all or substantially all" of the property and assets of Pacer
International. With respect to the disposition of property or assets, the
phrase "all or substantially all" as used in the indenture varies according to
the facts and circumstances of the subject transaction, has no clearly
established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a
Person, and therefore it may be unclear whether a Change of Control has
occurred and whether Pacer International is required to make a Change of
Control Offer.
Certain Covenants
The indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness
Pacer International will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise
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become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, Pacer International or
any of the Guarantors may incur Indebtedness (including, without limitation,
Acquired Indebtedness) and Restricted Subsidiaries of Pacer International that
are not Guarantors may incur Acquired Indebtedness, in each case if on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of Pacer
International is greater than 2.25 to 1.0 if such incurrence is on or prior to
June 1, 2000 and 2.5 to 1.0 if such incurrence is thereafter.
Limitation on Restricted Payments
Pacer International will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly,
(1) declare or pay any dividend or make any distribution, other than
dividends or distributions payable in Qualified Capital Stock of Pacer
International, on or in respect of shares of Pacer International's Capital
Stock to holders of such Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of Pacer International or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock;
(3) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of Pacer International, other than the notes, that is
subordinate or junior in right of payment to the notes; or
(4) make any Investment, other than Permitted Investments
(each of the foregoing actions set forth in clauses (1), (2), (3) and (4)
being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto:
(1) a Default or an Event of Default shall have occurred and be
continuing; or
(2) Pacer International is not able to incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness, in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; or
(3) the aggregate amount of Restricted Payments, including such proposed
Restricted Payment, made subsequent to the Issue Date (the amount expended
for such purposes, if other than in cash, being the fair market value of
such property as determined reasonably and in good faith by the Board of
Directors of Pacer International) shall exceed the sum of:
(a) 50% of the cumulative Consolidated Net Income, or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of
Pacer International earned subsequent to the Issue Date and on or prior
to the date the Restricted Payment occurs (the "Reference Date"),
treating such period as a single accounting period; plus
(b) 100% of the aggregate net cash proceeds and the fair market
value, as determined in good faith by the Board of Directors, of
property other than cash received by Pacer International from any
Person, other than a Subsidiary of Pacer International, from the
issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of Pacer International other
than any Qualified Capital Stock issued in exchange for the Pacer
Preferred Stock; plus
(c) without duplication of any amounts included in clause (3)(b)
above, 100% of the aggregate net cash proceeds of any equity
contribution received by Pacer International from a holder of Pacer
International's Capital Stock; plus
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(d) without duplication, the sum of:
(I) the aggregate amount returned in cash on or with respect to
Investments (other than Permitted Investments) made subsequent to
the Issue Date whether through interest payments, principal
payments, dividends or other distributions or payments;
(II) the net cash proceeds received by Pacer International or any
Restricted Subsidiary of Pacer International from the disposition of
all or any portion of such Investments (other than to a Subsidiary
of Pacer International); and
(III) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of such Subsidiary
(valued in each case as provided in the definition of "Investment");
provided, however, that the sum of clauses (I), (II) and (III) above
shall not exceed the aggregate amount of all such Investments made by
Pacer International or any Restricted Subsidiary in the relevant Person
or Unrestricted Subsidiary subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of Pacer
International, either (a) solely in exchange for shares of Qualified
Capital Stock of Pacer International or (b) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of Pacer International) of shares of Qualified Capital Stock of
Pacer International;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of Pacer International that
is subordinate or junior in right of payment to the notes either (a) solely
in exchange for shares of Qualified Capital Stock of Pacer International,
or (b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of Pacer
International) of (I) shares of Qualified Capital Stock of Pacer
International or (II) Refinancing Indebtedness;
(4) if no Default or Event of Default shall have occurred and be
continuing, repurchases by Pacer International or any Restricted Subsidiary
of Pacer International of Capital Stock of Pacer International or any
Restricted Subsidiary of Pacer International from (i) employees of Pacer
International or any of its Subsidiaries or their authorized
representatives (a) upon the death, disability or termination of employment
of such employees or consultants or to the extent required pursuant to
employee benefit plans, employment agreements or consulting agreements, (b)
pursuant to any other agreements with such employees of or consultants to
Pacer International or any of its Subsidiaries, in an aggregate amount not
to exceed $5.0 million in any calendar year (with unused amounts in any
calendar year being carried over to succeeding years subject to a maximum
of $10.0 million in any calendar year) or (c) to the extent required
pursuant to the Shareholder Agreement or the Option Plan or (ii) Richard P.
Hyland;
(5) the declaration and payment of dividends to holders of any class or
series of Preferred Stock (other than Disqualified Capital Stock) issued
after the issue date, provided that for the most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date of issuance of such Preferred Stock, after
giving effect to such issuance on a pro forma basis, Pacer International
would have had a Consolidated Fixed Charge Coverage Ratio of at least 1.75
to 1.0;
(6) the payment of dividends on Pacer International's Common Stock,
following the first public offering of Pacer International's Common Stock
after the Issue Date, of up to 6% per annum of the net proceeds received by
Pacer International in such public offering, other than public offerings
with respect to Pacer International's Common Stock registered on Form S-8;
(7) the repurchase, retirement or other acquisition or retirement for
value of equity interests of Pacer International in existence on the Issue
Date and from the persons holding such equity interests on the Issue
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Date and which are not held by Apollo or any of its Affiliates or members
of management of Pacer International and its Subsidiaries on the Issue Date
(including any equity interests issued in respect of such equity interests
as a result of a stock split, recapitalization, merger, combination,
consolidation or similar transaction), provided, however, that Pacer
International shall be permitted to make Restricted Payments under this
clause only if after giving effect thereto, Pacer International would be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the "Limitation on Incurrence of
Additional Indebtedness" covenant;
(8) other Restricted Payments in an aggregate amount not to exceed $10.0
million;
(9) if no Default or Event of Default shall have occurred and be
continuing, payments or distributions to dissenting stockholders pursuant
to applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of Pacer International; and
(10) if no Default or Event of Default shall have occurred and be
continuing, payments of cash in lieu of the issuance of fractional shares
upon the exercise of warrants or upon the conversion or exchange of, or
issuance of Capital Stock in lieu of cash dividends on, any Capital Stock
of Pacer International or any Restricted Subsidiary, which in the aggregate
do not exceed $3.0 million.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date in accordance with clause (3) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(b), (4), (5), (6),
(7), (8), (9) and (10) shall be included in such calculation.
Not later than the date of making any Restricted Payment, Pacer
International shall deliver to the Trustee an officers' certificate stating
that such Restricted Payment complies with the indenture and setting forth in
reasonable detail the basis upon which the required calculations were computed,
which calculations may be based upon Pacer International's latest available
internal quarterly financial statements.
Limitation on Asset Sales
Pacer International will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Pacer International or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of
(as determined in good faith by Pacer International's Board of Directors);
(2) at least 75% of the consideration received by Pacer International or
the Restricted Subsidiary, as the case may be, from such Asset Sale shall
be in the form of cash or Cash Equivalents and is received at the time of
such disposition; provided that the amount of (a) any liabilities (as shown
on Pacer International's or such Restricted Subsidiary's most recent
balance sheet) of Pacer International or any Restricted Subsidiary (other
than liabilities that are by their terms subordinated to the notes) that
are assumed by the transferee of any such assets, and (b) any notes or
other obligations received by Pacer International or any such Restricted
Subsidiary from such transferee that are converted by Pacer International
or such Restricted Subsidiary into cash within 180 days after such Asset
Sale (to the extent of the cash received) shall be deemed to be cash for
the purposes of this provision only; and
(3) upon the consummation of an Asset Sale, Pacer International shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof either:
(a) to prepay any Senior Debt or Guarantor Senior Debt and, in the
case of any Senior Debt or Guarantor Senior Debt under any revolving
credit facility, effect a permanent reduction in the availability under
such revolving credit facility;
(b) to make an Investment (x) in properties and assets that replace
the properties and assets that were the subject of such Asset Sale, (y)
in properties and assets that will be used in the business of
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Pacer International and its Restricted Subsidiaries as existing on the
Issue Date or in businesses the same, similar or reasonably related
thereto or (z) permitted by clause (1) of the definition of Permitted
Investments (collectively, "Replacement Assets"); or
(c) a combination of prepayment and investment permitted by the
foregoing clauses (3)(a) and (3)(b).
On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of Directors of Pacer International or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as
set forth in clauses (3)(a), (3)(b) and (3)(c) of the next preceding paragraph
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the next
preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by
Pacer International or such Restricted Subsidiary to make an offer to purchase
(the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date")
not less than 30 nor more than 60 days following the applicable Net Proceeds
Offer Trigger Date, from all holders of notes on a pro rata basis, that amount
of notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided, however, that if at any
time any non-cash consideration received by Pacer International or any
Restricted Subsidiary of Pacer International, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder as of the date of such conversion or disposition and the Net Cash
Proceeds thereof shall be applied in accordance with this covenant.
Pacer International may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $7.5
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $7.5
million, shall be applied as required pursuant to the preceding paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of Pacer International and its Restricted Subsidiaries as
an entirety to a Person in a transaction permitted under "-- Merger,
Consolidation and Sale of Assets," which transaction does not constitute a
Change of Control, the successor corporation shall be deemed to have sold the
properties and assets of Pacer International and its Restricted Subsidiaries
not so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets of
Pacer International or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the first two paragraphs of this covenant, Pacer
International and its Restricted Subsidiaries will be permitted to consummate
an Asset Sale without complying with such paragraphs to the extent that:
(1) at least 75% of the consideration for such Asset Sale constitutes
Replacement Assets; and
(2) such Asset Sale is for fair market value; provided that any
consideration not constituting Replacement Assets received by Pacer
International or any of its Restricted Subsidiaries in connection with any
Asset Sale permitted to be consummated under this paragraph shall
constitute Net Cash Proceeds subject to the provisions of the first two
paragraphs of this covenant.
Notice of each Net Proceeds Offer will be mailed to the record holders of
notes as shown on the register of holders of notes within 25 days following the
Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply
with the procedures set forth in the indenture. Upon receiving notice of the
Net Proceeds Offer, holders may elect to tender their notes in whole or in part
in integral multiples of $1,000 in exchange for cash. To the extent holders
properly tender notes in an amount exceeding the Net Proceeds Offer Amount,
notes of tendering holders will be purchased on a pro rata basis (based on
amounts tendered). To the extent that the aggregate amount of the notes
tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer
Amount, Pacer International may use such excess Net Proceeds Offer Amount for
general corporate
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purposes or for any other purposes not prohibited by the indenture. Upon
completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall
be reset at zero. A Net Proceeds Offer shall remain open for a period of 20
business days or such longer period as may be required by law.
Pacer International will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the indenture, Pacer International shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
Pacer International will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of Pacer International to (a) pay
dividends or make any other distributions on or in respect of its Capital
Stock; (b) make loans or advances or to pay any Indebtedness or other
obligation owed to Pacer International or any other Restricted Subsidiary of
Pacer International; or (c) transfer any of its property or assets to Pacer
International or any other Restricted Subsidiary of Pacer International, except
for such encumbrances or restrictions existing under or by reason of:
(1) applicable law;
(2) the indenture;
(3) the Credit Agreement;
(4) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary of Pacer
International;
(5) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person
so acquired;
(6) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature discussed in
clause (c) above on the property so acquired;
(8) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Restricted Subsidiary of Pacer
International pursuant to an agreement that has been entered into for the
sale or disposition of all or substantially all of the Capital Stock or
assets of such Restricted Subsidiary;
(9) secured Indebtedness otherwise permitted to be incurred pursuant to
the covenants described under "Limitation on Incurrence of Additional
Indebtedness" and "Limitation on Liens" that limit the right of the debtor
to dispose of the assets securing such Indebtedness;
(10) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) customary net worth provisions contained in leases and other
agreements entered into by Pacer International or any Restricted
Subsidiary;
(12) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred
to in clauses (1) through (11) above; provided, however, that the
provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable to Pacer International in any
material respect as determined by the board of directors of Pacer
International in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in
agreements referred to in such clauses; or
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(13) an agreement governing Indebtedness permitted to be incurred
pursuant to the "Limitation on Incurrence on Additional Indebtedness"
covenant; provided that the provisions relating to such encumbrance or
restriction contained in such Indebtedness are no less favorable to Pacer
International in any material respect as determined by the board of
directors of Pacer International in their reasonable and good faith
judgment than the provisions contained in the Credit Agreement as in effect
on the Issue Date.
Limitation on Liens
Pacer International will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of Pacer International or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the notes, the notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; and
(2) in all other cases, the notes are equally and ratably secured,
except for the following Liens which are expressly permitted:
(a) Liens existing as of the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
(b) Liens securing Senior Debt and Liens securing Guarantor Senior Debt;
(c) Liens securing the notes and the Guarantees;
(d) Liens of Pacer International or a Wholly Owned Restricted Subsidiary
of Pacer International on assets of any Restricted Subsidiary of Pacer
International;
(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness (including, without limitation, Acquired
Indebtedness) which has been secured by a Lien permitted under the
Indenture and which has been incurred in accordance with the provisions of
the Indenture; provided, however, that such Liens:
(I) are no less favorable to the holders of notes and are not more
favorable to the lienholders with respect to such Liens than the Liens
in respect of the Indebtedness being Refinanced; and
(II) do not extend to or cover any property or assets of Pacer
International or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and
(f) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt
Pacer International and the Guarantors have not incurred or suffered to
exist Indebtedness that is senior in right of payment to the notes or the
Guarantees, as the case may be, and subordinate in right of payment by its
terms to any other Indebtedness of Pacer International or such Guarantor, as
the case may be.
Merger, Consolidation and Sale of Assets
Pacer International will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of Pacer International to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of Pacer
International's assets (determined on a consolidated basis for Pacer
International and Pacer International's Restricted Subsidiaries) whether as an
entirety or substantially as an entirety to any Person unless:
(1) either (a) Pacer International shall be the surviving or continuing
corporation or (b) the Person (if other than Pacer International) formed by
such consolidation or into which Pacer International is merged
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or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of Pacer
International and of Pacer International's Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity"):
(x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of
Columbia; and
(y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium,
if any, and interest on all of the notes and the performance of every
covenant of the notes and the indenture on the part of Pacer
International to be performed or observed;
(2) immediately after giving effect to such transaction on a pro forma
basis and the assumption contemplated by clause (1)(b)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), Pacer International or such Surviving Entity, as the case may
be, shall be able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the "Limitation on Incurrence of
Additional Indebtedness" covenant;
(3) immediately before and immediately after giving effect to such
transaction on a pro forma basis and the assumption contemplated by clause
(1)(b)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred or repaid and any Lien granted or to be released in connection
with or in respect of the transaction), no Default or Event of Default
shall have occurred or be continuing; and
(4) Pacer International or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an officers' certificate and an opinion
of counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the
indenture and that all conditions precedent in the indenture relating to
such transaction have been satisfied.
Notwithstanding the foregoing, the merger of Pacer International with an
Affiliate incorporated solely for the purpose of reincorporating Pacer
International in another jurisdiction shall be permitted.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of Pacer International the Capital Stock of which constitutes all
or substantially all of the properties and assets of Pacer International, shall
be deemed to be the transfer of all or substantially all of the properties and
assets of Pacer International.
The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of Pacer International
in accordance with the foregoing, in which Pacer International is not the
continuing corporation, the successor Person formed by such consolidation or
into which Pacer International is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, Pacer International under the indenture and the notes
with the same effect as if such Surviving Entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the indenture in connection
with any transaction complying with the provisions of "--Limitation on Asset
Sales") will not, and Pacer International will not cause or permit any
Guarantor to, consolidate with or merge with or into any Person other than
Pacer International or any other Guarantor unless:
(1) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) or to which such sale, lease, conveyance or
other disposition shall have been made is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia;
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(2) such entity assumes by supplemental indenture all of the obligations
of the Guarantor on the Guarantee;
(3) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default shall have occurred and be
continuing; and
(4) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, Pacer International could
satisfy the provisions of clause (2) of the first paragraph of this
covenant.
Any merger or consolidation of a Guarantor with and into Pacer International
(with Pacer International being the surviving entity) or another Guarantor that
is a Wholly Owned Restricted Subsidiary of Pacer International need only comply
with clause (4) of the first paragraph of this covenant.
Limitations on Transactions with Affiliates
(1) Pacer International will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(2) below and (y) Affiliate Transactions on terms that are no less favorable
than those that might reasonably have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not an Affiliate of
Pacer International or such Restricted Subsidiary. All Affiliate Transactions
(and each series of related Affiliate Transactions which are similar or part of
a common plan) involving aggregate payments or other property with a fair
market value in excess of $2.0 million shall be approved by the board of
directors of Pacer International or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such board
of directors has determined that such transaction complies with the foregoing
provisions. If Pacer International or any Restricted Subsidiary of Pacer
International enters into an Affiliate Transaction (or a series of related
Affiliate Transactions related to a common plan) that involves an aggregate
fair market value of more than $10.0 million, Pacer International or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to Pacer International or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(2) The restrictions set forth in clause (1) shall not apply to:
(a) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of Pacer
International or any Restricted Subsidiary of Pacer International as
determined in good faith by Pacer International's board of directors;
(b) transactions exclusively between or among Pacer International and
any of its Wholly Owned Restricted Subsidiaries or exclusively between or
among such Wholly Owned Restricted Subsidiaries, provided such transactions
are not otherwise prohibited by the indenture;
(c) any agreement as in effect as of the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the
Holders in any material respect than the original agreement as in effect on
the Issue Date;
(d) Restricted Payments permitted by the indenture;
(e) transactions in which Pacer International or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to
Pacer International or such Restricted Subsidiary from a financial point of
view or meets the requirements of the first sentence of paragraph (1)
above;
(f) the existence of, or the performance by Pacer International or any
of its Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement
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or purchase agreement related thereto) to which it is a party as of the
Issue Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by Pacer
International or any of its Restricted Subsidiaries of obligations under,
any future amendment to any such existing agreement or under any similar
agreement entered into after that Issue Date shall only be permitted by
this clause to the extent that the terms of any such amendment or new
agreement are not otherwise disadvantageous to the holders of the notes in
any material respect;
(g) the issuance of securities or other payments, awards or grants in
cash securities or otherwise pursuant to or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board
of Directors of Pacer International in good faith and loans to employees of
Pacer International and its Subsidiaries which are approved by the board of
directors of Pacer International in good faith;
(h) the payment of all fees and expenses related to the Transactions;
(i) transactions with customers, clients, suppliers, or purchasers or
sellers of goods or services, in each case in the ordinary course of
business and otherwise in compliance with the terms of the indenture, which
are fair to Pacer International or its Restricted Subsidiaries, in the
reasonable determination of the board of directors of Pacer International
or the senior management thereof, or are on terms at least as favorable as
might reasonably have been obtained at such time from an unaffiliated
party; and
(j) fees payable to Apollo pursuant to the Management Agreement and the
Shareholders Agreement.
Additional Subsidiary Guarantees
If Pacer International or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Domestic Restricted Subsidiary that is not a
Guarantor, or if Pacer International or any of its Restricted Subsidiaries
shall organize, acquire or otherwise invest in another Domestic Restricted
Subsidiary having total equity value in excess of $1.0 million, then such
transferee or acquired or other Restricted Subsidiary shall:
(1) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of Pacer International
obligations under the notes and the indenture on the terms set forth in the
indenture;
(2) deliver to the Trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such
Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary; and
(3) execute a Guarantee.
Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes
of the indenture.
Reports to Holders
The indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any notes are outstanding, Pacer
International will file a copy of the following information and reports with
the Commission for public availability (unless the Commission will not accept
such a filing) and will furnish to the holders of notes and to securities
analysts and prospective investors, upon their request:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if Pacer International were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of Pacer International and its consolidated Subsidiaries and,
with respect to the annual information only, a report thereon by Pacer
International's certified independent accounts; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Pacer International were required to file such
reports,
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in each case within five days the time periods specified in the Commission's
rules and regulations.
In addition, following the consummation of this exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, Pacer International will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available
to securities analysts and prospective investors upon written request to Pacer
International.
In addition, Pacer International has agreed that, for so long as any notes
remain outstanding, it will furnish to the holders thereof and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default
The following events are defined in the indenture as "Events of Default":
(1) the failure to pay interest on any notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
indenture);
(2) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or
not such payment shall be prohibited by the subordination provisions of the
indenture);
(3) a default in the observance or performance of any other covenant or
agreement contained in the indenture which default continues for a period
of 30 days after Pacer International receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the holders of at least 25% of the outstanding principal amount of the
notes;
(4) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of Pacer International or any Restricted Subsidiary of
Pacer International, or the acceleration of the final stated maturity of
any such Indebtedness if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final stated
maturity or which has been accelerated, aggregates $10.0 million or more at
any time;
(5) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against Pacer International or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(6) certain events of bankruptcy affecting Pacer International or any of
its Significant Subsidiaries; or
(7) any of the Guarantees of a Significant Subsidiary ceases to be in
full force and effect or any of the Guarantees of a Significant Subsidiary
is declared to be null and void and unenforceable or any of the Guarantees
of a Significant Subsidiary is found to be invalid or any Guarantor that is
a Significant Subsidiary denies its liability under its Guarantee (other
than by reason of release of a Guarantor in accordance with the terms of
the indenture).
If an Event of Default (other than an Event of Default specified in clause
(6) above with respect to Pacer International) shall occur and be continuing,
the Trustee or the holders of at least 25% in principal amount of outstanding
notes may declare the principal of and accrued interest on all the notes to be
due and payable by notice in writing to Pacer International and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration", and the same (1) shall become immediately due and payable or (2)
if there are any amounts outstanding under the Credit Agreement, shall become
immediately due and payable upon the first to
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occur of an acceleration under the Credit Agreement or five business days after
receipt by Pacer International and the Representative under the Credit
Agreement of such notice of acceleration but only if such Event of Default is
then continuing. If an Event of Default specified in clause (6) above with
respect to Pacer International occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of
the outstanding notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of notes.
The indenture provides that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the holders
of a majority in principal amount of the notes may rescind and cancel such
declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;
(4) if Pacer International has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses, disbursements and
advances; and
(5) in the event of the cure or waiver of an Event of Default of the
type described in clause (6) of the description above of Events of Default,
the Trustee shall have received an officers' certificate and an opinion of
counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the indenture, and its consequences,
except a default in the payment of the principal of or interest on any notes.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the Trust Indenture Act. Subject to the
provisions of the indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
indenture at the request, order or direction of any of the holders the notes,
unless such holders have offered to the Trustee reasonable indemnity. Subject
to all provisions of the indenture and applicable law, the holders of a
majority in aggregate principal amount of the then outstanding notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
Under the indenture, Pacer International is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default or
Event of Default) that has occurred and, if applicable, describe such Default
or Event of Default and the status thereof.
No Personal Liability of Directors, Officers, Employees and Stockholders
No Affiliate, director, officer, employee or stockholder of Pacer
International or any Subsidiary, as such, shall have any liability for any
obligations of Pacer International under the notes or the indenture or the
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes.
Legal Defeasance and Covenant Defeasance
Pacer International may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding notes ("Legal Defeasance"). Such Legal Defeasance
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means that Pacer International shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding notes, except for:
(1) the rights of holders of notes to receive payments in respect of the
principal of, premium, if any, and interest on the notes when such payments
are due;
(2) Pacer International's obligations with respect to the notes
concerning issuing temporary notes, registration of notes, mutilated,
destroyed, lost or stolen notes and the maintenance of an office or agency
for payments;
(3) the rights, powers, trust, duties and immunities of the Trustee and
Pacer International's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, Pacer International may, at its option and at any time, elect to
have the obligations of Pacer International released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Pacer International must irrevocably deposit with the Trustee, in
trust, for the benefit of the holders of notes, cash in U.S. dollars, non-
callable U.S. government obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be;
(2) in the case of Legal Defeasance, Pacer International shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that:
(a) Pacer International has received from, or there has been
published by, the Internal Revenue Service a ruling; or
(b) since the date of the execution of the indenture, there has been
a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Pacer International shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the holders of notes
will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture, the
Credit Agreement or any other material agreement or instrument to which
Pacer International or any of its Subsidiaries is a party or by which Pacer
International or any of its Subsidiaries is bound;
(6) Pacer International shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by Pacer International
with the intent of preferring the holders of notes over any
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other creditors of Pacer International or with the intent of defeating,
hindering, delaying or defrauding any other creditors of Pacer
International or others;
(7) Pacer International shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent hereunder provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with;
(8) Pacer International shall have delivered to the Trustee an opinion
of counsel to the effect that:
(a) the trust funds will not be subject to any rights of holders of
Senior Debt, including, without limitation, those arising under the
indenture; and
(b) assuming no intervening bankruptcy of Pacer International between
the date of deposit and the 91st day following the date of the deposit
and that no holder of notes is an insider of Pacer International, after
the 91st day following the date of the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
and
(9) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by clause (2)
above need not be delivered if all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable on the maturity date within one year or (z) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of Pacer International.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration or transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding Notes
when:
(1) either (a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been replaced or paid
and notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by Pacer International and thereafter
repaid to Pacer International or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation have become due and payable and
Pacer International has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the
entire Indebtedness on the notes not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest on the
notes to the date of deposit together with irrevocable instructions from
Pacer International directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may be;
(2) Pacer International has paid all other sums payable under the
indenture by Pacer International; and
(3) Pacer International has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the indenture relating to the satisfaction and discharge of the
indenture have been complied with.
Modification of the Indenture
From time to time, Pacer International, the Guarantors and the Trustee,
without the consent of the holders of notes, may amend the indenture for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the
Trustee, adversely affect the rights of any of the holders of notes in any
material respect. In formulating its opinion on such matters, the Trustee will
be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion
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of counsel. Other modifications and amendments of the indenture may be made
with the consent of the holders of a majority in principal amount of the then
outstanding notes issued under the indenture, except that, without the consent
of each holder of notes affected thereby, no amendment may:
(1) reduce the amount of notes whose holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the time
for payment of interest, including defaulted interest, on any notes;
(3) reduce the principal of or change or have the effect of changing the
fixed maturity of any notes, or change the date on which any notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor;
(4) make any notes payable in money other than that stated in the notes;
(5) make any change in provisions of the indenture protecting the right
of each holder of notes to receive payment of principal of and interest on
such note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount of notes
to waive Defaults or Events of Default;
(6) amend, change or modify in any material respect the obligation of
Pacer International to make and consummate a Change of Control Offer in the
event of a Change of Control which has occurred or make and consummate a
Net Proceeds Offer with respect to any Asset Sale that has been consummated
or modify any of the provisions or definitions with respect thereto after a
Change of Control has occurred or the subject Asset Sale has been
consummated;
(7) modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes or any
Guarantee in a manner which adversely affects the holders of notes;
(8) release any Guarantor that is a Significant Subsidiary from any of
its obligations under its Guarantee or the indenture otherwise than in
accordance with the terms of the indenture; or
(9) make any change in the foregoing amendment provisions which require
each noteholder's consent or in the waiver provisions.
Governing Law
The indenture provides that it, the notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
The Trustee
The indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
The indenture and the provisions of the Trust Indenture Act contain certain
limitations on the rights of the Trustee, should it become a creditor of Pacer
International, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security or
otherwise. Subject to the Trust Indenture Act, the Trustee will be permitted to
engage in other transactions; provided that if the Trustee acquires any
conflicting interest as described in the Trust Indenture Act, it must eliminate
such conflict or resign.
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Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries (1) existing at the time such Person becomes a Restricted
Subsidiary of Pacer International or at the time it merges or consolidates with
Pacer International or any of its Restricted Subsidiaries or (2) assumed in
connection with the acquisition of assets from such Person, in each case not
incurred by such Person in connection with, or in anticipation or contemplation
of, such Person becoming a Restricted Subsidiary of Pacer International or such
acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Apollo" means Apollo Management, L.P. and its Affiliates.
"Applicable Premium" means, with respect to a note, the greater of (i) 1.0%
of the then outstanding principal amount of such note and (ii) (a) the present
value of all remaining required interest and principal payments due on such
note and all premium payments relating thereto assuming a redemption date of
June 1, 2003, computed using a discount rate equal to the Treasury Rate plus 50
basis points minus (b) the then outstanding principal amount of such note minus
(c) accrued interest paid on the date of redemption.
"Asset Acquisition" means:
(1) an Investment by Pacer International or any Restricted Subsidiary of
Pacer International in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of Pacer International or any Restricted
Subsidiary of Pacer International, or shall be merged with or into or
consolidated with Pacer International or any Restricted Subsidiary of Pacer
International; or
(2) the acquisition by Pacer International or any Restricted Subsidiary
of Pacer International of the assets of any Person (other than a Restricted
Subsidiary of Pacer International) which constitute all or substantially
all of the assets of such Person or comprise any division or line of
business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by Pacer
International or any of its Restricted Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than Pacer International or a Wholly
Owned Restricted Subsidiary of Pacer International of (a) any Capital Stock of
any Restricted Subsidiary of Pacer International; or (b) any other property or
assets of Pacer International or any Restricted Subsidiary of Pacer
International other than in the ordinary course of business; provided, however,
that Asset Sales shall not include:
(1) a transaction or series of related transactions for which Pacer
International or its Restricted Subsidiaries receive aggregate
consideration of less than $1.5 million;
(2) the sale or exchange of equipment in connection with the purchase or
other acquisition of other equipment, in each case used in the business of
Pacer International and its Restricted Subsidiaries;
(3) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of Pacer International as permitted under
"Merger, Consolidation and Sale of Assets";
(4) disposals of equipment in connection with the reinvestment in or the
replacement of its equipment and disposals of worn-out or obsolete
equipment, in each case in the ordinary course of business of Pacer
International or its Restricted Subsidiaries;
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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
("S&P") or Moody's Investors Service, Inc. ("Moody's");
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250.0 million;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
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"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets
of Pacer International to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with
any Affiliates thereof (whether or not otherwise in compliance with the
provisions of the indenture) other than Permitted Holders;
(2) the approval by the holders of Capital Stock of Pacer International
of any plan or proposal for the liquidation or dissolution of Pacer
International (whether or not otherwise in compliance with the provisions
of the Indenture);
(3) any Person or Group (other than the Permitted Holders) shall become
the owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of Pacer
International; or
(4) the replacement of a majority of the board of directors of Pacer
International over a two-year period from the directors who constituted the
board of directors of Pacer International at the beginning of such period,
and such replacement shall not have been approved by the Permitted Holders
or a vote of at least a majority of the board of directors of Pacer
International then still in office who either were members of such board of
directors at the beginning of such period or whose election as a member of
such board of directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby,
(a) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses),
(b) Consolidated Interest Expense, and
(c) Consolidated Non-cash Charges less any noncash items increasing
Consolidated Net Income for such period,
all as determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP as applicable.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis (consistent with the provisions below) for the period of such
calculation to:
(1) the incurrence or repayment of any Indebtedness of such Person or
any of its Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness
in the ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at
any time
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subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date, as if such incurrence or repayment, as the case may
be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period;
(2) any asset sales or other dispositions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of such Person or one of its
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (including any pro forma expense and cost reductions,
adjustments and other operating improvements or synergies both achieved by
such Person during such period and to be achieved by such Person and with
respect to the acquired assets, all as determined in good faith by a
responsible financial or accounting officer of Pacer International and as
reported on or otherwise confirmed, consistent with applicable standards of
the American Institute of Certified Public Accountants, to Pacer
International by an independent accounting firm) attributable to the assets
which are the subject of the Asset Acquisition or asset sale or other
dispositions during the Four Quarter Period) occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such asset
sale or other dispositions or Asset Acquisition (including the incurrence,
assumption or liability for any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness; and
(3) all adjustments used in connection with the calculation of adjusted
EBITDA as set forth in the Offering Memorandum dated May 24, 1999 relating
to the issuance of the Notes on the Issue Date to the extent such
adjustments are not fully reflected in such Four Quarter Period and
continue to be applicable.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated
Fixed Charge Coverage Ratio,"
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; and
(2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense (excluding amortization or write-off
of deferred financing costs), plus
(2) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including without limitation, (a) any amortization
of debt discount and amortization or write-off of deferred financing costs
(including the amortization of costs relating to interest rate caps or
other similar agreements), (b) the net costs under
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Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation; and
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP, minus interest income for such period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(1) after-tax gains or losses from Asset Sales (without regard to the
$1.5 million limitation set forth in the definition thereof) or
abandonments or reserves relating thereto;
(2) after-tax items classified as extraordinary or nonrecurring gains or
losses;
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
the referent Person or is merged or consolidated with the referent Person
or any Restricted Subsidiary of the referent Person;
(4) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is prohibited by
contract, operation of law or otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary of
the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person by such Person;
(6) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued); and
(7) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings
of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Credit Agreement" means the Credit Agreement to be dated as of the Issue
Date, among Pacer International, the lenders party thereto in their capacities
as lenders thereunder and Bankers Trust Company, as administrative agent,
together with the related documents thereto (including, without limitation,
any guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder or adding
Restricted Subsidiaries of Pacer International as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect Pacer
International or any Restricted Subsidiary of Pacer International against
fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
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"Designated Senior Debt" means:
(1) Indebtedness under or in respect of the Credit Agreement; and
(2) any other Indebtedness constituting Senior Debt which, at the time
of determination, has an aggregate principal amount of at least $25.0
million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by Pacer International.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control or Asset Sale), matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof (except, in each case, upon the occurrence of a Change of
Control or Asset Sale) on or prior to the final maturity date of the Notes;
provided that the Pacer Preferred Stock and any Capital Stock having
substantially the same terms issued in exchange therefor shall be deemed not to
be Disqualified Capital Stock.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary incorporated
or otherwise organized or existing under the laws of the United States, any
state thereof or any territory or possession of the United States.
"Equity Investment" means the equity investment (in the form of the
issuance, rollover and exchange of Pacer International, Inc.'s and Pacer
Logistics, Inc.'s equity securities) in Pacer International of approximately
$133.0 million.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the board of directors of Pacer International
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the board of directors of Pacer International delivered to the
Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Guarantor" means:
(1) each of Pacer International's Domestic Restricted Subsidiaries on
the Issue Date; and
(2) each of Pacer International's Domestic Restricted Subsidiaries that
in the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of the indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor, the principal
of, premium, if any, and interest (including any interest accruing subsequent
to the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same
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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;
(6) guarantees and other contingent Obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause (8)
below;
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(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured;
(8) all Obligations under currency agreements and interest swap
agreements of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the amount
of Indebtedness represented by such Disqualified Capital Stock being equal
to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if
any.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the board of directors of the issuer of such
Disqualified Capital Stock. For purposes of the covenant described above under
the caption "Limitation on Incurrence of Additional Indebtedness," in
determining the principal amount of any Indebtedness to be incurred by Pacer
International or a Guarantor or which is outstanding at any date, the
principal amount of any Indebtedness which provides that an amount less than
the principal amount thereof shall be due upon any declaration of acceleration
thereof shall be the accreted value thereof at the date of determination.
"Independent Financial Advisor" means a firm:
(1) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in Pacer
International; and
(2) which, in the judgment of the board of directors of Pacer
International, is otherwise independent and qualified to perform the task
for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by Pacer International and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of Pacer
International or such Restricted Subsidiary, as the case may be. For purposes
of the "Limitation on Restricted Payments" covenant:
(1) "Investment" shall include and be valued at the fair market value of
the net assets of any Restricted Subsidiary of Pacer International at the
time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary of Pacer International and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary of Pacer International at
the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of Pacer International; and
(2) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by Pacer
International or any of its Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such
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Investment, reduced by the payment of dividends or distributions in
connection with such Investment or any other amounts received in respect of
such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount
of any Investment if such payment of dividends or distributions or receipt
of any such amounts would be included in Consolidated Net Income.
If Pacer International or any Restricted Subsidiary of Pacer International
sells or otherwise disposes of any Common Stock of any direct or indirect
Restricted Subsidiary of Pacer International such that, after giving effect to
any such sale or disposition, Pacer International no longer owns, directly or
indirectly, 100.0% of the outstanding Common Stock of such Restricted
Subsidiary, Pacer International shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the old notes in
connection with the private offering thereof.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Management Agreement" means the Management Agreement to be dated as of the
Issue Date between Pacer International and Apollo.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by Pacer International or any of its Restricted Subsidiaries from
such Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(3) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale; and
(4) appropriate amounts to be provided by Pacer International or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained
by Pacer International or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Option Plan" means Pacer International's 1999 Stock Option Plan with
respect to an aggregate of no more than 1.8 million shares of Pacer
International's Common Stock and Pacer Preferred Stock.
"Pacer Preferred Stock" means the Perpetual Participating Exchangeable
Preferred Stock of Pacer Logistics, Inc. as in effect on the Issue Date.
"Permitted Holders" means (i) Apollo and (ii) members of senior management
of Pacer International and its Subsidiaries.
"Permitted Indebtedness" means, without duplication, each of the following:
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(1) Indebtedness under the notes and the Guarantees issued in the
private offering of the old notes;
(2) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $235.0
million less the amount of all repayments of term debt and permanent
commitment reductions under the Credit Agreement with Net Cash Proceeds of
Asset Sales applied thereto as required by the "Limitation on Asset Sales"
covenant; provided, that the aggregate principal amount of Indebtedness
permitted to be incurred from time to time under this clause (2) shall be
reduced dollar for dollar by the amount of any Indebtedness then
outstanding under clause (12) below;
(3) other Indebtedness of Pacer International and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(4) Interest Swap Obligations of the Pacer International covering
Indebtedness of Pacer International or any of its Restricted Subsidiaries
and Interest Swap Obligations of any Restricted Subsidiary of Pacer
International covering Indebtedness of Pacer International or such
Restricted Subsidiary; provided, however, that such Interest Swap
Obligations are entered into to protect Pacer International and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(5) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of Pacer International and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(6) Indebtedness of a Restricted Subsidiary of Pacer International to
Pacer International or to a Wholly Owned Restricted Subsidiary of Pacer
International for so long as such Indebtedness is held by Pacer
International, a Wholly Owned Restricted Subsidiary of Pacer International
or the lenders or collateral agent under the Credit Agreement, in each case
subject to no Lien held by a Person other than Pacer International, a
Wholly Owned Restricted Subsidiary of Pacer International or the lenders or
collateral agent under the Credit Agreement; provided that if as of any
date any Person other than Pacer International, a Wholly Owned Restricted
Subsidiary of Pacer International or the lenders or collateral agent under
the Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(7) Indebtedness of Pacer International to a Wholly Owned Restricted
Subsidiary of Pacer International for so long as such Indebtedness is held
by a Wholly Owned Restricted Subsidiary of Pacer International or the
lenders or the collateral agent under the Credit Agreement and is subject
to no Lien other than a Lien in favor of the lenders or collateral agent
under the Credit Agreement; provided that (a) any Indebtedness of Pacer
International to any Wholly Owned Restricted Subsidiary of Pacer
International is unsecured and subordinated, pursuant to a written
agreement, to Pacer International's obligations under the indenture and the
notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of Pacer International owns or holds any such
Indebtedness or any Person holds a Lien other than a Lien in favor of the
lenders or collateral agent under the Credit Agreement in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by Pacer International;
(8) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(9) Indebtedness of Pacer International or any of its Restricted
Subsidiaries in respect of performance bonds, bankers' acceptances,
workers' compensation claims, surety or appeal bonds, payment obligations
in connection with self-insurance or similar obligations, and bank
overdrafts (and letters of credit in respect thereof);
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(10) Indebtedness represented by Capitalized Lease Obligations, Purchase
Money Indebtedness or Acquired Indebtedness of Pacer International and its
Restricted Subsidiaries incurred in the ordinary course of business not to
exceed $25.0 million at any one time outstanding; provided that all or a
portion of the $25.0 million permitted to be incurred under this clause
(10) may, at the option of the Company, be incurred under the Credit
Agreement or pursuant to clause (14) below (in addition to the $25.0
million set forth therein) instead of pursuant to Capitalized Lease
Obligations, Purchase Money Indebtedness or Acquired Indebtedness;
(11) Indebtedness arising from agreements of Pacer International or a
Restricted Subsidiary of Pacer International providing for indemnification,
adjustment of purchase price or similar obligations, in each case, incurred
or assumed in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition; provided, however, that:
(a) such Indebtedness is not reflected on the balance sheet of Pacer
International or any Restricted Subsidiary of Pacer International
(contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this
clause (a)); and
(b) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds being
measured at the time it is received and without giving effect to any
subsequent changes in value) actually received by Pacer International
and its Restricted Subsidiaries in connection with such disposition;
(12) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction that is without recourse to Pacer
International or to any Restricted Subsidiary of Pacer International or
their assets (other than such Receivables Subsidiary and its assets), and
is not guaranteed by any such Person; provided that any outstanding
Indebtedness incurred under this clause (12) shall reduce (for so long as,
and to the extent that, the Indebtedness referred to in this clause (12)
remains outstanding) the aggregate amount permitted to be incurred under
clause (2) above to the extent set forth therein;
(13) Refinancing Indebtedness; and
(14) additional Indebtedness of Pacer International and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $25.0 million
at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under the Credit Agreement) plus up to an additional $25.0
million as contemplated by, and to the extent not incurred under, clause
(10) above.
For purposes of determining compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of Permitted
Indebtedness described in clauses (1) through (14) above or is entitled to be
incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions
of such covenant, Pacer International shall, in its sole discretion, classify
(or later reclassify) such item of Indebtedness in any manner that complies
with such covenant. Accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Capital Stock in the form of additional shares of the same class
of Disqualified Capital Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Capital Stock for purposes of the
"Limitation on Incurrence of Additional Indebtedness" covenant.
"Permitted Investments" means:
(1) Investments by Pacer International or any Restricted Subsidiary of
Pacer International in any Person that is or will become immediately after
such Investment a Wholly Owned Restricted Subsidiary of Pacer International
or that will merge or consolidate into Pacer International or a Wholly
Owned
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Restricted Subsidiary of Pacer International; provided that such Wholly
Owned Restricted Subsidiary of Pacer International is not restricted from
making dividends or similar distributions by contract, operation of law or
otherwise;
(2) Investments in Pacer International by any Restricted Subsidiary of
Pacer International; provided that any Indebtedness evidencing such
Investment is unsecured and subordinated, pursuant to a written agreement,
to Pacer International's obligations under the notes and the indenture;
(3) Investments in cash and Cash Equivalents;
(4) loans and advances to employees and officers of Pacer International
and its Restricted Subsidiaries in the ordinary course of business for bona
fide business purposes not to exceed $4.0 million at any one time
outstanding;
(5) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of Pacer International's or its Restricted
Subsidiaries' businesses and otherwise in compliance with the indenture;
(6) additional Investments (including joint ventures) not to exceed
$25.0 million at any one time outstanding;
(7) Investments in securities of trade creditors or customers received
(a) pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers or (b) in
settlement of delinquent obligations of, and other disputes with,
customers, suppliers and others, in each case arising in the ordinary
course of business or otherwise in satisfaction of a judgment;
(8) Investments (a) made by Pacer International or its Restricted
Subsidiaries as a result of consideration received in connection with an
Asset Sale made in compliance with the "Limitation on Asset Sales"
covenant; or (b) acquired in exchange for, or out of the proceeds of, a
substantially concurrent offering of Capital Stock (other than Disqualified
Stock) of Pacer International (which proceeds of any such offering of
Capital Stock of Pacer International shall not have been, and shall not be,
included in clause (3)(b) of the first paragraph of the "Limitation on
Restricted Payments" covenant);
(9) Investments of a Person or any of its Subsidiaries existing at the
time such Person becomes a Restricted Subsidiary of Pacer International or
at the time such Person merges or consolidates with Pacer International or
any of its Restricted Subsidiaries, in either case in compliance with the
indenture; provided that such Investments were not made by such Person in
connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of Pacer International or such merger or
consolidation; and
(10) Investments in the notes or Pacer Preferred Stock.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which Pacer International or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen, customs and revenue
authorities and other Liens imposed by law incurred in the ordinary course
of business for sums not yet delinquent or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect thereof;
(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids,
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leases, government contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of
borrowed money);
(4) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(5) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(7) Liens securing Indebtedness permitted pursuant to clause (10) of the
definition of "Permitted Indebtedness"; provided, however, that in the case
of Purchase Money Indebtedness (a) the Indebtedness shall not exceed the
cost of such property or assets and shall not be secured by any property or
assets of Pacer International or any Restricted Subsidiary of Pacer
International other than the property and assets so acquired or constructed
and (b) the Lien securing such Indebtedness shall be created within 180
days of such acquisition or construction or, in the case of a refinancing
of any Purchase Money Indebtedness, within 180 days of such refinancing;
(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances or similar credit transactions issued or created for the
account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;
(9) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(10) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of Pacer
International or any of its Restricted Subsidiaries, including rights of
offset and set-off;
(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(12) Liens in the ordinary course of business not exceeding $5.0 million
at any one time outstanding that (a) are not incurred in connection with
borrowing of money and (b) do not materially detract from the value of the
property or materially impair its use;
(13) Liens by reason of judgment or decree not otherwise resulting in an
Event of Default;
(14) Liens securing Indebtedness permitted to be incurred pursuant to
clauses (12) and (14) of the definition of "Permitted Indebtedness";
(15) Liens securing Indebtedness under Currency Agreements permitted
under the indenture; and
(16) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant
(including, without limitation, clause (10) of the definition of Permitted
Indebtedness); provided that:
(a) such Liens secured such Acquired Indebtedness at the time of and
prior to the incurrence of such Acquired Indebtedness by Pacer
International or a Restricted Subsidiary of Pacer International and
were not granted in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of Pacer International; and
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(b) such Liens do not extend to or cover any property or assets of
Pacer International or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to
the time such Indebtedness became Acquired Indebtedness of Pacer
International or a Restricted Subsidiary of Pacer International and are
no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by
Pacer International or a Restricted Subsidiary of Pacer International.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of Pacer International and
its Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment and any
Refinancing thereof.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by Pacer International or any of its
Restricted Subsidiaries pursuant to which Pacer International or any of its
Restricted Subsidiaries may sell, convey or otherwise transfer to (1) a
Receivables Subsidiary (in the case of a transfer by Pacer International or any
of its Restricted Subsidiaries) and (2) any other person (in the case of a
transfer by a Receivables Subsidiary), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of Pacer
International or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of Pacer
International that engages in no activities other than in connection with the
financing of accounts receivable and that is designated by the Board of
Directors of Pacer International (as provided below) as a Receivables
Subsidiary:
(1) no portion of the Indebtedness or any other Obligations (contingent
or otherwise) of which (a) is guaranteed by Pacer International or any
Restricted Subsidiary of Pacer International (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered
into in the ordinary course of business in connection with a Qualified
Receivables Transaction), (b) is recourse to or obligates Pacer
International or any Restricted Subsidiary of Pacer International in any
way other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction or (c) subjects any property or
asset of Pacer International or any Restricted Subsidiary of Pacer
International, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business
in connection with a Qualified Receivables Transaction;
(2) with which neither Pacer International nor any Restricted Subsidiary
of Pacer International has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to Pacer International
or such Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of Pacer International, other than fees
payable in the ordinary course of business in connection with servicing
accounts receivable; and
(3) with which neither Pacer International nor any Restricted Subsidiary
of Pacer International has any obligation to maintain or preserve such
Restricted Subsidiary's financial condition or cause such Restricted
Subsidiary to achieve certain levels of operating results.
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Any such designation by the board of directors of Pacer International shall
be evidenced to the Trustee by filing with the Trustee a Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing conditions.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by Pacer International or
any Restricted Subsidiary of Pacer International of (A) for purposes of clause
(13) of the definition of Permitted Indebtedness, Indebtedness incurred or
existing in accordance with the "Limitation on Incurrence of Additional
Indebtedness" covenant (other than pursuant to clause (2), (4), (5), (6), (7),
(8), (9), (10), (11), (12) or (14) of the definition of Permitted Indebtedness)
or (B) for any other purpose, Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant, in each case
that does not:
(1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by Pacer International in connection with such
Refinancing); or
(2) create Indebtedness with (a) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced or (b) a final maturity earlier than the final maturity of
the Indebtedness being Refinanced; provided that (x) if such Indebtedness
being Refinanced is Indebtedness solely of Pacer International, then such
Refinancing Indebtedness shall be Indebtedness solely of Pacer
International and (y) if such Indebtedness being Refinanced is subordinate
or junior to the notes, then such Refinancing Indebtedness shall be
subordinate to the notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to Pacer International or a Restricted Subsidiary of any property,
whether owned by Pacer International or any Restricted Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by Pacer
International or such Restricted Subsidiary to such Person or to any other
Person from whom funds have been or are to be advanced by such Person on the
security of such Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of Pacer International, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium,
if any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing by Pacer International in
respect of,
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(x) all monetary obligations of every nature of Pacer International
under, or with respect to, the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities;
(y) all Interest Swap Obligations (including guarantees thereof); and
(z) all obligations under Currency Agreements (including guarantees
thereof), in each case whether outstanding on the Issue Date or thereafter
incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(1) any Indebtedness of Pacer International to a Subsidiary of Pacer
International;
(2) Indebtedness to, or guaranteed on behalf of, any director, officer
or employee of Pacer International or any Subsidiary of Pacer International
(including, without limitation, amounts owed for compensation);
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or owing
by Pacer International;
(6) that portion of any Indebtedness incurred in violation of the
indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s)
of such obligation or their representative shall have received an officers'
certificate of Pacer International to the effect that the incurrence of
such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at
the date on which the initial borrowing thereunder is made would not)
violate such provisions of the indenture);
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to Pacer International; and
(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of Pacer International.
"Shareholder Agreement" means the Shareholders Agreement to be dated as of
the Issue Date among certain affiliates of Apollo Management, L.P., APL Limited
and APL Land Transport Services, Inc.
"Significant Subsidiary," with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Subsidiary," with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such Person; or
(2) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned
by such Person.
"Transactions" means the offering of the notes, the recapitalization of
Pacer International, the Equity Investment and the related borrowings under the
Credit Agreement on the Issue Date.
"Treasury Rate" means the rate per annum equal to the yield to maturity at
the time of computation of United States Treasury securities with a constant
maturity selected by the Calculation Agent (which shall
137
<PAGE>
initially be the Trustee) most nearly equal to the period from such date of
redemption to June 1, 2003; provided, however, that if the period from such
date of redemption to June 1, 2003 is not equal to the constant maturity of the
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from such date of redemption to June 1, 2003 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to
a constant maturity of one year shall be used.
"Unrestricted Subsidiary" of any Person means (1) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the board of directors of such Person in the
manner provided below and (2) any Subsidiary of an Unrestricted Subsidiary. The
board of directors may designate any Subsidiary (including any newly acquired
or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, Pacer International or any other Subsidiary of Pacer International that is
not a Subsidiary of the Subsidiary to be so designated; provided that (x) Pacer
International certifies to the Trustee in an officers' certificate that such
designation complies with the "Limitation on Restricted Payments" covenant and
(y) each Subsidiary to be so designated and each of its Subsidiaries has not at
the time of designation, and does not thereafter, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
Pacer International or any of its Restricted Subsidiaries. The board of
directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation,
Pacer International is able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant and (y) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Any such designation by the
board of directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation
and an officers' certificate certifying that such designation complied with the
foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (1) the then outstanding
aggregate principal amount of such Indebtedness into (2) the sum of the total
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
138
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the exchange notes will initially be issued in
the form of one or more fully registered notes in global form without coupons
(each a "Global Note"). Each Global Note shall be deposited with the trustee,
as custodian for, and registered in the name of DTC or a nominee thereof. The
old notes to the extent validly tendered and accepted and directed by their
holders in their letters of transmittal, will be exchanged through book-entry
electronic transfer for the Global Note.
The Global Notes
We expect that pursuant to procedures established by DTC
(1) upon the issuance of the Global Notes, DTC or its custodian will
credit, on its internal system, the principal amount of the individual
beneficial interests represented by such Global Notes to the respective
accounts of persons who have accounts with such depository and
(2) ownership of beneficial interests in the Global Notes will be shown
on, and the transfer of such ownership will be effected only through:
. records maintained by DTC or its nominee with respect to interests
of persons who have accounts with DTC ("participants") and
. the records of participants with respect to interests of persons
other than participants.
Such accounts initially will be designated by or on behalf of the initial
purchasers and ownership of beneficial interests in the Global Notes will be
limited to participants or persons who hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of the
notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes
will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the indenture with respect
to the notes.
Payments of the principal of, premium, if any, and interest on, the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of us, the trustee or any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of principal,
premium, if any, or interest in respect of the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal of the Global Notes as shown
on the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the Global Notes held through
such participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Note for any reason, including to sell notes to persons in
jurisdictions which require physical delivery of the notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture. Consequently, the ability to transfer notes or to pledge
notes as collateral will be limited to such extent.
Notes that are issued as described below under "Certificated Notes," will be
issued in registered definitive form without coupons (each, a "Certificated
Note"). Upon the transfer of Certificated Notes, such Certificated
139
<PAGE>
Notes may, unless the Global Note has previously been exchanged for
Certificated Notes, be exchanged for an interest in the Global Note
representing the principal amount of notes being transferred.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interest in the Global Notes are credited and only in respect of such
portion of the aggregate principal amount of notes as to which such
participant or participants has or have given such direction. However, if
there is an event of default under the Indenture, DTC will exchange the Global
Notes for Certificated Notes, which it will distribute to its participants.
DTC has advised us as follows:
(1) DTC is a limited purpose trust company organized under the laws of
the State of New York,
(2) a member of the Federal Reserve System,
(3) a "clearing corporation" within the meaning of the Uniform
Commercial Code and
(4) a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the issuers nor the trustee will have any
responsibility for the performances by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by us within 90
days, Certificated Notes will be issued in exchange for the Global Notes.
140
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax
considerations relevant to the exchange of notes for the exchange notes
pursuant to the exchange offer. This discussion is based upon currently
existing provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change, possibly on a retroactive basis. There can be no
assurance that the Internal Revenue Service will not take positions contrary to
those taken in this discussion, and no ruling from the Internal Revenue Service
has been or will be sought. This discussion does not address all of the U.S.
federal income tax considerations that may be relevant to particular holders of
notes in light of their individual circumstances, nor does it address all of
the U.S. federal income tax considerations that may be relevant to holders
subject to special rules, including, for example, banks and other financial
institutions, insurance companies, tax-exempt entities, dealers in securities,
and persons holding notes as part of a hedging or conversion transaction or a
straddle. Holders are urged to consult their own tax advisors as to the
particular U.S. federal income tax consequences to them of exchanging notes for
exchange notes, as well as the tax consequences under state, local, foreign and
other tax laws, and the possible effects of changes in tax laws.
Exchange of Notes for Exchange Notes
The exchange of notes for the exchange notes pursuant to the exchange offer
should not be treated as an "exchange" for U.S. federal income tax purposes.
Consequently, a holder that exchanges notes for exchange notes pursuant to the
exchange offer should not recognize taxable gain or loss on such exchange, such
holder's adjusted tax basis in the exchange notes should be the same as its
adjusted tax basis in the notes exchanged therefor immediately before such
exchange, and such holder's holding period for the exchange notes should
include the holding period for the notes exchanged therefor.
141
<PAGE>
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of exchange notes
received in exchange for notes where such notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for
a period of 180 days after the expiration date, it will make this prospectus,
as amended or supplemented, available to any Participating Broker-Dealer for
use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
Participating Broker-Dealers. Exchange notes received by Participating Broker-
Dealers for their own account pursuant to the exchange offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the exchange notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such Participating Broker-Dealer or the
purchasers of any such exchange notes. Any Participating Broker-Dealer that
resells exchange notes that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such exchange notes may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit on any such resale of exchange notes and
any commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any Participating Broker-Dealer that requests such documents in
the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer, including the expenses of one counsel for the holders of the
notes, other than commissions or concessions of any Participating Broker-
Dealers and will indemnify the holders of the notes, including any
Participating Broker-Dealers, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for us
by Dewey Ballantine LLP, New York, New York.
CHANGE IN ACCOUNTANT
Pacer International, with the approval of its board of directors, on
changed its independent accountants from Arthur Andersen LLP to
PricewaterhouseCoopers LLP. Arthur Andersen's report on the financial
statements of Pacer International (formerly America President Lines Stacktrain
Services) as of December 25, 1998 and December 26, 1997 and for the fiscal year
ended December 25, 1998 and the period from November 13, 1997 to December 26,
1997 and the financial statements of American President Lines Stacktrain
Services' predecessor as of December 27, 1996 and for the period from December
28, 1996 through November 12, 1997 and the fiscal year ended December 27, 1996
included in this prospectus was not qualified or modified as to uncertainty,
audit scope, or accounting principles. During Arthur Andersen LLP's appointment
as independent accountants, there were no disagreements on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope of procedure which if not resolved to Arthur Andersen LLP's satisfaction
would have caused Arthur Andersen LLP to make reference to the subject matter
of the disagreement in connection with Arthur Andersen LLP's reports on Pacer
International financial statements for the periods indicated above.
142
<PAGE>
EXPERTS
The financial statements of American President Lines Stacktrain Services, a
division of APL Land Transport Services, Inc., currently known as Pacer
International, Inc., as of December 25, 1998 and December 26, 1997 and for the
fiscal year ended December 25, 1998 and the period from November 13, 1997 to
December 26, 1997 and the financial statements of American President Lines
Stacktrain Services' predecessor as of December 27, 1996 and for the period
from December 28, 1996 through November 12, 1997 and the fiscal year ended
December 27, 1996 included in this prospectus and elsewhere in this requisition
statement to the extent and for the periods indicated in their report have been
audited by Arthur Andersen LLP, independent public accountants, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Pacer International, Inc., now
known as Pacer Logistics, Inc., and its subsidiaries as of December 31, 1998
and 1997 and for the year ended December 31, 1998 and the period from March 31,
1997 through December 31, 1997 and the financial statements of Pacer
International, Inc.'s predecessor as of March 31, 1997 and for the period from
January 1, 1997 through March 31, 1997 and for the year ended December 31,
1996, included in this prospectus and elsewhere in this registration statement
to the extent and for the periods indicated in their report have been audited
by Arthur Andersen LLP, independent public accountants, and are included herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
Arthur Andersen LLP has not audited any financial statements or individual
transactions of American President Lines Stacktrain Services, Pacer
International, Inc. or their predecessors or successors subsequent to the
periods stated above.
143
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES--A DIVISION OF APL LAND TRANSPORT
SERVICES, INC. (currently known as Pacer International, Inc. )*
HISTORICAL AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................ F-2
Statements of Operations for the fiscal year ended December 25, 1998,
the period November 13, 1997 through December 26, 1997, the period
December 28, 1996 through November 12, 1997 and the fiscal year ended
December 27, 1996...................................................... F-3
Statements of Assets, Liabilities and Divisional Control Account as of
December 25, 1998, December 26, 1997 and December 27, 1996............. F-4
Statements of Cash Flows for the fiscal year ended December 25, 1998,
the period November 13, 1997 through December 26, 1997, the period
December 28, 1996 through November 12, 1997 and the fiscal year ended
December 27, 1996...................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
UNAUDITED INTERIM FINANCIAL STATEMENTS
Statements of Assets, Liabilities and Divisional Control Account as of
April 2, 1999 and December 25, 1998.................................... F-15
Statements of Operations for the three months ended April 2, 1999 and
April 3, 1998.......................................................... F-16
Statements of Cash Flows for the three months ended April 2, 1999 and
April 3, 1998.......................................................... F-17
Notes to Financial Statements........................................... F-18
PACER INTERNATIONAL, INC. (currently known as Pacer Logistics, Inc. )*
HISTORICAL AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................ F-19
Consolidated Balance Sheets as of December 31, 1998 and 1997 and March
31, 1997............................................................... F-20
Consolidated Statements of Operations for the year ended December 31,
1998, the period from inception (March 31, 1997) through December 31,
1997, the period from January 1, 1997 through March 31, 1997 and the
year ended December 31, 1996........................................... F-21
Consolidated Statements of Changes in Stockholders' Equity for the year
ended December 31, 1998, the period from inception (March 31, 1997)
through December 31, 1997, the period from January 1, 1997 through
March 31, 1997 and the year ended December 31, 1996.................... F-22
Consolidated Statements of Cash Flows for the year ended December 31,
1998, the period from inception (March 31, 1997) through December 31,
1997, the period from January 1, 1997 through March 31, 1997 and the
year ended December 31, 1996........................................... F-23
Notes to Consolidated Financial Statements.............................. F-24
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.. F-41
Consolidated Statements of Operations for the three months ended March
31, 1999 and March 31, 1998............................................ F-42
Consolidated Statements of Cash Flows for the three months ended March
31, 1999 and March 31, 1998............................................ F-43
Notes to Consolidated Financial Statements.............................. F-44
</TABLE>
- --------
* 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
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To APL Limited:
We have audited the accompanying statements of assets, liabilities and
divisional control account (as revised--see Note 3) of American President Lines
Stacktrain Services (a division of APL Land Transport Services, Inc., a
Tennessee corporation and a wholly-owned subsidiary of APL Limited) as of
December 25, 1998 and December 26, 1997 and the related statements of
operations and cash flows (as revised--see Note 3) for the fiscal year ended
December 25, 1998, and the period from November 13, 1997 through December 26,
1997. We have also audited the accompanying statements of assets, liabilities
and divisional control account (as revised--see Note 3) of the Predecessor
(identified in Note 1) as of December 27, 1996 and the related statements of
operations and cash flows (as revised--see Note 3) for the period from December
28, 1996 through November 12, 1997, and for the fiscal year ended December 27,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American President Lines
Stacktrain Services as of December 25, 1998 and December 26, 1997 and the
results of its operations and cash flows for the fiscal year ended December 25,
1998 and the period from November 13, 1997 through December 26, 1997, and the
financial position of the Predecessor as of December 27, 1996 and the results
of the Predecessor's operations and cash flows for the period from December 28,
1996 through November 12, 1997 and the fiscal year ended December 27, 1996, in
conformity with generally accepted accounting principles.
Memphis, Tennessee,
January 29, 1999
F-2
<PAGE>
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)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
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
- --------------------------------------------------
====== ===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
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)
<TABLE>
<CAPTION>
The Company The Predecessor
------------------------- ---------------
December 25, December 26, December 27,
1998 1997 1996
------------ ------------ ---------------
(In millions) (In millions)
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
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)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
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.......................... -- -- -- --
------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
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
<PAGE>
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 :
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
Cash Paid to Parent for:
Interest................... $ -- $0.3 $ 2.0 $ --
Income Taxes............... $3.4 $0.6 $12.2 $18.1
</TABLE>
Allowance for Doubtful Accounts
The provision for doubtful accounts for the period ended November 12, 1997
was $0.3 million. The provision for doubtful accounts was less than $0.1
million for all other periods presented in the Statements of Operations. At
December 25, 1998, December 26, 1997 and December 27, 1996, the allowance for
doubtful accounts was $0.7 million, $0.9 million and $0.7 million,
respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
arising from services provided to customers are generally not collateralized
and accordingly, the Company performs ongoing credit evaluations of its
customers to reduce the risk of loss. The Company has two third party customers
who account for about 25% to 30% of revenues. The receivables from these
customers were $12.6 million at December 25, 1998.
Property and Equipment
Property and Equipment at November 12, 1997, as adjusted by the Parent in
connection with the purchase by NOL, was stated at fair value as prescribed by
the purchase method of accounting. Prior to and after the
F-7
<PAGE>
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:
<TABLE>
<CAPTION>
Classification Estimated Useful Life
-------------- ---------------------
<S> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
Estimated
Classification Useful Life
-------------- -----------
<S> <C>
Goodwill............................................................... 40 Years
Other Intangibles...................................................... 10 Years
</TABLE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
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
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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:
<CAPTION>
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)
<S> <C> <C> <C> <C>
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
===== ===== ===== =====
</TABLE>
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:
<TABLE>
<CAPTION>
The Company The Predecessor
-------------- ---------------
1998 1997 1996
------ ------ ---------------
(In millions) (In millions)
<S> <C> <C> <C> <C>
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)
====== ====== =====
</TABLE>
F-10
<PAGE>
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:
<TABLE>
<CAPTION>
The Company The Predecessor
-------------- ---------------
1998 1997 1996
------ ------ ---------------
(In millions) (In millions)
<S> <C> <C> <C>
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:
<CAPTION>
The Company The Predecessor
-------------- ---------------
1998 1997 1996
------ ------ ---------------
(In millions) (In millions)
<S> <C> <C> <C>
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
--------------------------------------------------
====== ====== =====
</TABLE>
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:
<TABLE>
<CAPTION>
Operating
Leases
-------------
(In millions)
<S> <C>
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
======
</TABLE>
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
<PAGE>
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
<PAGE>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 8. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company provides intermodal services
to APL. These services include moving containers from ports to inland points,
moving containers from inland points to ports, and repositioning empty
containers. These transactions are performed on a cost reimbursement basis.
Thus, no revenues or expenses are recognized for financial reporting purposes.
Reimbursements amounted to $276.7 million, $22.3 million, $154.1 million, and
$173.0 million for the fiscal year ended December 25, 1998, and the periods
ended December 26, 1997 and November 12, 1997, and the fiscal year ended
December 27, 1996, respectively.
In addition, the Company receives a credit from APL for the repositioning
expense that APL has avoided due to the Company using APL's containers in
surplus locations. The total amount of revenue recognized for these services
was $20.0 million, $1.9 million, $15.8 million, and $15.7 million for the
fiscal year ended December 25, 1998, the periods ended December 26, 1997 and
November 12, 1997, and the fiscal year ended December 27, 1996, respectively.
The Company also provides services to the Automotive Division. These
services include moving containers primarily in the U.S.--Mexico trade. Total
amount of revenue recognized for these services was $38.7 million, $5.0
million, $38.4 million and $62.5 million for the fiscal year ended December 25,
1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal
year ended December 27, 1996, respectively.
The Parent and its subsidiaries share certain expenses with the Company.
These expenses include systems support, office space, salaries, and other
corporate services. These expenses were $14.4 million, $1.6 million, $12.0
million and $11.0 million for the fiscal year ended December 25, 1998, the
periods ended December 26, 1997 and November 12, 1997, and the fiscal year
ended December 27, 1996, respectively. The Company also receives an allocation
for lease and maintenance and repair expenses from APL. These expenses were
$19.5 million, $1.9 million, $14.1 million and $13.6 million for the fiscal
year ended December 25, 1998, the periods ended December 26, 1997 and November
12, 1997, and the fiscal year ended December 27, 1996, respectively.
In 1997, in connection with NOL's acquisition of APL Limited, the Parent
incurred certain merger related costs totaling approximately $61 million. These
non-operating costs do not relate to the ongoing operations of the Company and
have not been allocated to the Company's results of operations.
APL de Mexico, S.A. de C.V. (APL Mexico), a wholly owned Mexican subsidiary
of the Parent, provides various agency services to the Company with respect to
its bills of lading in Mexico. Expenses recorded by the Company from APL Mexico
were $0.5 million, $0.1 million, $0.3 million and $0.4 million for the fiscal
year ended December 25, 1998, the periods ended December 26, 1997 and November
12, 1997, and the fiscal year ended December 27, 1996, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Commitments
Rail Transportation
Certain of the rail contracts which the Company holds are held jointly with
American President Lines, Ltd., some of which are not assignable. One or more
of the contracting railroads may seek to either renegotiate and/or terminate
the contract if the Company or American President Lines, Ltd. takes an action
that would cause a material adverse effect on such railroad.
F-13
<PAGE>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In May 1996, the Parent sold a portion of Distribution Services to a third
party purchaser. In connection with this sale, the Company and the purchaser
entered into a 10-year agreement to provide stacktrain services to the
purchaser. The remaining portion of Distribution Services was transferred to
the Parent.
Contingencies
In June 1995, the Parent sold the assets of its trucking company, American
President Trucking ("APT"), to Burlington Motor Carriers ("BMC"). The sale
included the sublease of terminal real estate to BMC and the sublease of
tractor units to Stoops Freightliner, which in turn entered into a use
agreement with BMC. BMC and the Company entered into a service agreement
whereby the Company guaranteed certain levels of traffic to BMC. Under new
ownership from a 1995 bankruptcy proceeding, BMC advised the Parent and the
Company that it believed the Company breached the service agreement when APLLTS
sold its Distribution Services unit, and demanded $800,000 in compensation. The
Company disputed the claim. BMC and Stoops Freightliner filed subsequent
complaints in BMC bankruptcy proceedings demanding unspecified damages. The
Parent and the Company filed motions to dismiss both complaints. On November
13, 1998, the Parent and the Company's motions were granted; BMC has filed an
appeal; Stoops Freightliner has not. The Company does not believe that the
ultimate outcome, if unfavorable, will have a material adverse impact on the
financial position of the Parent or the Company, and has not reserved for this
contingency.
The Company is a party to various legal proceedings, claims and assessments
arising in the course of its business activities. Based upon information
presently available, and in light of legal and other defenses and insurance
coverage and other potential sources of payment available to the Company,
management does not expect these legal proceedings, claims and assessments,
individually or in the aggregate, to have a material adverse impact on the
Company's financial position or results of operations.
NOTE 10. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT
As of May 28, 1999, APL Limited sold approximately 93% of its interest in
the Company to an affiliate of Apollo Management, L.P. (together with its
affiliates, Apollo). The transaction value comprised $292.5 million paid upon
closing plus an additional payment of up to $15 million if the Company achieves
a specific earnings target for financial year 1999. As part of the agreement,
APL Limited and APL continue to use the services of the Company under a 20-year
agreement and have agreed to provide to the buyer administrative, systems and
equipment services, at cost, for varying periods, none in excess of 20 years.
In connection with the transaction, the buyer changed the name of the Company
to Pacer International, Inc.
F-14
<PAGE>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES
a division of APL Land Transport Services, Inc.
STATEMENT OF ASSETS, LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
<TABLE>
<CAPTION>
April 2, 1999 December 25, 1998
------------- -----------------
(Unaudited)
(In millions)
<S> <C> <C> <C>
ASSETS
Current assets
Trade and Other Receivables, Net......... $ 45.1 $ 43.9
Intercompany Trade Receivables........... 15.6 3.4
Prepaid Expenses and Other Current
Assets.................................. 1.0 0.1
------ ------
Total Current Assets.................... 61.7 47.4
------ ------
Property and Equipment
Rail Cars................................ 66.6 66.5
Containers and Chassis................... 27.6 27.6
Leasehold Improvements and Other......... 1.3 1.3
------ ------
95.5 95.4
Accumulated Depreciation and Amortization.. (8.4) (6.6)
------ ------
Property and Equipment, Net.............. 87.1 88.8
Goodwill and Other Intangibles, Net........ 19.1 19.2
Other Assets............................... 2.8 0.7
------ ------
Total Assets............................ $170.7 $156.1
====== ======
LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
Current Liabilities
Accounts Payable and Accrued
Liabilities............................. $ 95.5 $ 84.6
------ ------
Total Current Liabilities............... 95.5 84.6
------ ------
Deferred Tax Liability..................... 15.7 15.4
Other Liabilities.......................... 0.5 0.5
Commitments and Contingencies (Note 3)
Divisional Control Account................. 59.0 55.6
------ ------
Total Liabilities and Divisional Control
Account................................ $170.7 $156.1
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES
a division of APL Land Transport Services, Inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
April 2, 1999 April 3, 1998
------------------ ------------------
(Unaudited) (Unaudited)
(In millions)
<S> <C> <C>
Revenues
Freight Revenues........................ $156.9 $143.9
Avoided Reposition...................... 5.5 5.0
Other Revenue........................... 1.2 1.3
------ ------
Total Revenues............................ 163.6 150.2
Expenses
Variable Expenses
Terminal/Cargo Handling................. 1.0 1.1
Rail Linehaul........................... 122.1 113.5
Trucks and Other........................ 3.1 2.7
Empty Reposition........................ 3.6 2.3
Equipment Maintenance and Repair........ 5.2 4.8
Other................................... (2.6) (2.9)
------ ------
Total Variable Expense................ 132.4 121.5
------ ------
Variable Contribution..................... 31.2 28.7
Fixed Expenses
Terminal/Cargo Handling................. 0.5 0.4
Fixed Equipment
Rail Cars.............................. 1.4 2.0
Containers/Chassis..................... 12.7 11.6
Other.................................. 0.9 1.3
------ ------
Total Fixed Equipment................. 15.0 14.9
General and Administrative Expenses
Direct Expenses........................ 4.3 4.2
Other Overhead......................... 0.2 0.2
Corporate Headquarters................. 1.6 1.5
IT Systems............................. 2.0 2.0
------ ------
Total General and Administrative...... 8.1 7.9
Total Fixed Expenses................ 23.6 23.2
------ ------
Operating Income.......................... 7.6 5.5
Charge in Lieu of Income Taxes............ (2.8) (2.0)
------ ------
Net Income................................ $ 4.8 $ 3.5
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES
a division of APL Land Transport Services, Inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
April 2, 1999 April 3, 1998
------------------ ------------------
(Unaudited) (Unaudited)
(In millions)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income.............................. $ 4.8 $ 3.5
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization......... 1.9 1.7
Gain on Sale of Property and
Equipment............................ -- (0.3)
Deferred Taxes........................ 0.3 (0.3)
Change in Current Assets and
Liabilities:
Trade and Other Receivables.......... (1.2) (68.6)
Intercompany Trade Receivables....... (12.2) (9.6)
Prepaid Expenses and Other Current
Assets.............................. (0.9) (1.3)
Accounts Payable and Accrued
Liabilities......................... 10.9 15.2
Other................................ (2.1) (0.9)
------ ------
Net Cash Provided by (Used in)
Operating Activities............... 1.5 (60.6)
Cash Flows from Investing Activities
Capital Expenditures.................... -- (16.3)
Proceeds from Sales of Property and
Equipment.............................. -- 0.3
------ ------
Net Cash Used in Investing
Activities......................... -- (16.0)
Cash flows from Financing Activities
Intercompany Funding, Net............... (1.5) 76.6
------ ------
Repayment of Capital Lease Obligations
Net Cash (Used in) Provided by
Financing Activities............... (1.5) 76.6
Net Increase (Decrease) in Cash and Cash
Equivalents............................ -- --
Cash and Cash Equivalents at Beginning
of Period.............................. -- --
------ ------
Cash and Cash Equivalents at End of
Period................................. $ -- $ --
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.
NOTES TO FINANCIAL STATEMENTS
(In millions)
NOTE 1. BASIS OF INTERIM PERIOD PRESENTATION
The unaudited interim financial statements as of April 2, 1999 and for the
three months ended April 2, 1999 and April 3, 1998 are condensed and do not
contain all information required by generally accepted accounting principles to
be included in a full set of financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
that are necessary for fair presentation have been included. The results of
operations for any interim period are not necessarily indicative of the results
of operations to be expected for any full fiscal year. The audited financial
statements of American President Lines Stacktrain Services, presented elsewhere
in this prospectus, include a summary of significant accounting policies and
should be read in conjunction with these interim financial statements.
NOTE 2. SUBSEQUENT EVENTS
Neptune Orient Lines Limited ("NOL") through a wholly-owned subsidiary, APL
Limited ("Parent") has entered into an agreement dated March 15, 1999 with
Apollo Management L.P. ("Apollo") through a wholly-owned subsidiary, Coyote
Acquisition, Inc. ("Coyote") in which Apollo agreed to acquire a controlling
interest in American President Lines Stacktrain Services (the "Company"), a
division of APL Land Transport Services, a wholly-owned subsidiary of APL
Limited in exchange for $292.5 plus contingent consideration of up to $15.0.
The transaction closed on May 28, 1999. In connection with this transaction,
the Company was renamed Pacer International, Inc.
NOTE 3. CONTINGENCIES
In June 1995, the Parent sold the assets of its trucking company, American
President Trucking ("APT") to Burlington Motor Carriers ("BMC"). The sale
included the sublease of terminal real estate to BMC and the sublease of
tractor units to Stoops Freightliner, which in turn entered into a use
agreement with BMC. BMC and the Company entered into a service agreement
whereby the Company guaranteed certain levels of traffic to BMC. Under new
ownership from a 1995 bankruptcy proceeding, BMC advised the Parent and the
Company that it believed the Company breached the service agreement when LTS
sold its Distribution Services unit, and demanded $0.8 million in compensation.
The Company disputed the claim. BMC and Stoops Freightliner filed subsequent
complaints in BMC bankruptcy proceedings demanding unspecified damages. The
Parent and the Company filed motions to dismiss both complaints. On November
13, 1998, the Parent and the Company's motions were granted; BMC has filed an
appeal; Stoop Freightliners has not. The Company does not believe that the
ultimate outcome, if unfavorable, will have a material adverse impact on the
financial position of the Parent or the Company, and has not reserved for this
contingency.
The Company is a party to various legal proceedings, claims and assessments
arising in the course of its business activities. Based upon information
presently available, and in light of legal and other defenses and insurance
coverage and other potential sources of payment available to the Company,
management does not expect these legal proceedings, claims and assessments,
individually or in the aggregate, to have a material adverse impact on the
Company's financial position or results of operations.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of Pacer International, Inc.:
We have audited the accompanying consolidated balance sheets of Pacer
International, Inc. (a Delaware corporation) and Subsidiaries (the Company) as
of December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1998, and for the period from inception, March 31, 1997, through December 31,
1997. We have also audited the accompanying balance sheet of the Predecessor
(business identified in Note 1) as of March 31, 1997, and the related
statements of operations, stockholders' equity and cash flows for the period
from January 1, 1997 through March 31, 1997, and for the year ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pacer
International, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
results of their consolidated operations and their cash flows for the year
ended December 31, 1998, and for the period from inception, March 31, 1997,
through December 31, 1997, and the financial position of the Predecessor as of
March 31, 1997, and the result of its operations and its cash flows for the
period from January 1, 1997, through March 31, 1997, and for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
San Francisco, California
February 10, 1999
F-19
<PAGE>
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.
<TABLE>
<CAPTION>
The
The Company Predecessor
------------------------- -----------
December 31, December 31, March 31,
1998 1997 1997
------------ ------------ -----------
<S> <C> <C> <C>
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
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE>
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.
<TABLE>
<CAPTION>
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
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
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
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE>
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.
<TABLE>
<CAPTION>
The Predecessor
---------------------------------------------------------------
Retained
Additional Earnings
Preferred Common Paid-in (Accumulated Stockholders'
Stock Stock Warrants Capital Deficit) Equity
--------- ------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
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
==== ==== ==== ======= ======= =======
<CAPTION>
The Company
---------------------------------------------------------------
Additional
Preferred Common Paid-in Retained Stockholders'
Stock Stock Warrants Capital Earnings Equity
--------- ------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
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
==== ==== ==== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE>
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.
<TABLE>
<CAPTION>
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
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
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 $ -- $ --
======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS:
The Company
PMT Holdings, Inc. (PMT Holdings), a Delaware corporation, was formed on
March 5, 1997 (inception), to acquire all of the capital stock of Pacific Motor
Transport Company (PMT) in a management buyout that was funded in part by Eos
Partners, L.P. (Eos). On March 31, 1997, PMT Holdings acquired all issued and
outstanding shares of PMT from Union Pacific Railroad Company and its
subsidiaries (UP) for approximately $13 million in cash and warrants to
purchase 18,421 units of PMT Holdings stock. Each unit represents nine and one-
half shares of common stock and one share of preferred stock and may be
purchased by UP for $10 per unit. The purchase of PMT was accounted for using
the purchase method of accounting. Prior to acquisition, PMT was a provider of
truckload freight services and intermodal marketing services. On December 16,
1997, PMT Holdings acquired all of the capital stock of Interstate
Consolidation, Inc. (ICI) and Interstate Consolidation Service, Inc. (ICSI) and
its wholly owned subsidiary, Intermodal Container Service, Inc. (IMCS) (ICI,
ICSI and IMCS, collectively, Interstate) by issuing $20 million in promissory
notes and 1,353,750 shares of PMT Holdings common stock. The acquisition of
Interstate was accounted for using the purchase method of accounting.
Interstate is a multipurpose provider of transportation services, including
intermodal marketing, cartage, and freight consolidation and handling. In May
1998, PMT Holdings was renamed Pacer International, Inc. (Pacer International).
The name change has been given retroactive application in these consolidated
financial statements. In addition, earnings per share for all periods and all
share data reflect the Company's 9.5 to 1 stock split, which occurred in
December 1998.
On April 3, 1998, Pacer International acquired all the stock of Intraco,
Inc. (Stutz) for $.5 million in cash plus 217,142 shares of Pacer International
common stock. On June 5, 1998, Pacer International acquired all of the capital
stock of Cross Con Transport, Inc., and Cross Con Terminals, Inc.
(collectively, Cross Con) for $11 million in cash plus 541,500 shares of Pacer
International common stock. On July 25, 1998, Pacer International acquired
substantially all the assets of Professional Logistics Management Co., Inc. and
3PL Corporation (collectively, PLMC), for $2.9 million in cash. On December 9,
1998, Pacer International acquired all of the capital stock of Manufacturers
Consolidation Service, Inc. and its subsidiary, Levcon, Inc., MCS of Kansas,
Inc., and Manufacturers Consolidation Service of Canada Inc. (collectively,
MCS) for $4.9 million in cash. All of these acquisitions were accounted for
using the purchase method of accounting. Both Cross Con and MCS are
multipurpose providers of transportation services, including intermodal
marketing and cartage. PLMC is a provider of logistics services, and Stutz is
involved in the transportation of equipment primarily for railroads.
The consolidated balance sheets as of December 31, 1998 and 1997, include
the accounts of Pacer International and its wholly owned subsidiaries (the
Company). At December 31, 1998, the wholly owned subsidiaries are PMT, Cross
Con, Pacer International Rail Services LLC, Pacer Rail Services LLC, Pacer
International Consulting LLC, Pacer Logistics, Inc. (which holds the stock of
Interstate), Pacer Integrated Logistics, f/k/a Stutz, PLM Acquisition
Corporation (PLMC) and MCS.
The consolidated statements of operations, changes in stockholders' equity
and cash flows include the accounts of Pacer International from March 31, 1997,
the results and cash flows of PMT since its purchase on March 31, 1997,
Interstate since its purchase on December 16, 1997, Stutz since its purchase on
April 3, 1998, Cross Con since its purchase on June 5, 1998, PLMC since its
purchase on July 23, 1998, and MCS since its purchase on December 9, 1998.
The Predecessor
The balance sheet as of March 31, 1997, and the statements of operations,
changes in stockholders' equity and cash flows for the period from January 1,
1997, through March 31, 1997, include the accounts of PMT (the Predecessor),
with its two operating divisions, Pacer and ABL-Trans.
F-24
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Nature of Operations
The Company's business consists primarily of (i) intermodal marketing, which
involves the provision of brokerage and logistics services by coordinating the
transportation of goods by truck and rail, (ii) specialized trucking services,
including flatbed heavy-haul trucking, drayage and cartage, and (iii) other
transportation services, such as freight consolidation and handling. As a
nonasset-based service provider, the Company is able to focus its efforts on
providing value-added logistics solutions for its customers through its network
of sales personnel and third-party brokerage partnerships. The Company
primarily provides services to numerous global, national and regional
manufacturers and retailers.
Reliance on Agents and Independent Contractors
The Company relies upon the services of independent commission agents to
market its transportation services, to act as intermediaries with customers,
and to recruit independent contractors. Contracts with agents and independent
contractors are, in most cases, terminable upon short notice by either party.
Although the Company believes its relationships with agents and independent
contractors are good, there can be no assurance that the Company will continue
to be successful in retaining its agents and independent contractors or that
agents and independent contractors who terminate their contracts can be
replaced by equally qualified persons. Furthermore, since agents have the
primary relationship with customers and independent contractors, the loss of an
agent can result in the loss of customers or independent contractors.
Dependence on Railroads and Equipment and Services Availability
The Company is dependent upon the major railroads in the United States for
substantially all of the intermodal services provided by the Company. In many
markets, rail service is limited to a few railroads or even a single railroad.
Consequently, a reduction in or elimination of rail service to a particular
market is likely to adversely affect the Company's ability to provide
intermodal transportation services to some of the Company's customers.
Furthermore, significant rate increases, work stoppage or adverse weather
conditions can impact the railroads and therefore the Company's ability to
provide cost-effective services to its customers.
In addition, the Company is dependent in part on the availability of truck,
rail, ocean and air services provided by independent third parties. If the
Company were unable to secure sufficient equipment or other transportation
services to meet its customers' needs, its results of operations could be
materially adversely affected on a temporary or permanent basis.
Concentration of Business on Intermodal Marketing
A significant portion of the Company's revenues is derived from intermodal
marketing. As a result, a decrease in demand for intermodal transportation
services relative to other transportation services could have a material
adverse effect on the Company's results of operations.
Concentration of Credit Risk and Customer Concentration
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade accounts receivable. The Company
sells primarily on net 30-day terms, performs credit evaluation procedures on
its customers and generally does not require collateral on its accounts
receivable. The Company maintains an allowance for potential credit losses and
insures certain of its receivables at Interstate through a third-party
insurance provider. Sales to the Company's ten largest customers constituted 33
percent of gross revenues for the year ended December 31, 1998, and 31 percent
of gross revenues for the nine months ended December 31, 1997. Receivables from
the ten largest customers constituted 20 percent and 33 percent of total
receivables at December 31, 1998 and 1997, respectively. No customer
constituted more than 10 percent of revenues or receivables at December 31,
1998 or 1997. The sales and receivable trends are representative of prior
periods.
F-25
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. The effects of the Year 2000 Issue may be
experienced before, on or after January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may range from minor errors to
significant systems failure, which could affect an entity's ability to conduct
normal business operations. While the Company is in the process of remediating
its affected hardware and software, it is not possible to be certain that all
aspects of the Year 2000 Issue affecting an entity, including those related to
the efforts of customers, suppliers, or other third parties, will be fully
resolved. If the Company, its customers or suppliers, or other third parties do
not successfully remedy their Year 2000 Issue, the Company's results of
operations could be materially adversely affected.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of
Pacer International and its wholly owned subsidiaries. All material
intercompany amounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less.
Accounts Receivable
Trade accounts receivable are reflected net of allowances for doubtful
accounts. Additionally, the Company records receivables for contractually
negotiated rail volume incentives in the period earned. Rail volume incentives
receivable were $1.9 million at December 31, 1998 and 1997, and $0.3 million at
March 31, 1997.
Property and Equipment
Property, plant and equipment purchased in acquisitions are recorded at fair
value as prescribed by the purchase method of accounting. Subsequent purchases
of property, plant and equipment are recorded at cost. For assets financed
under capital leases, the present value of the future minimum lease payments is
recorded at the date of acquisition as property and equipment, with a
corresponding amount recorded as a capital lease obligation.
F-26
<PAGE>
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:
<TABLE>
<CAPTION>
Estimated
Asset Classification Useful Life
-------------------- -------------
<S> <C>
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
</TABLE>
Software
Purchases of software are capitalized and amortized over three to five years
using the straight-line method. Costs related to internal development of
software are expensed as incurred.
Intangible Assets
Amortization is computed on a straight-line basis over the shorter of
estimated useful lives or contract periods. The Company amortizes goodwill over
periods ranging from 15 to 40 years and loan fees over the term of the
underlying debt.
Goodwill represents the excess of cost over the estimated fair value of the
net tangible and intangible assets of acquired businesses. Should events or
circumstances occur subsequent to any business acquisition that bring into
question the realizable value or impairment of any component of goodwill, the
Company will evaluate the remaining useful life and balance of goodwill and
make appropriate adjustments. The Company's principal considerations in
determining impairment include the strategic benefit to the Company of the
particular business related to the questioned component of goodwill as measured
by undiscounted current and expected future operating income levels of that
particular business and expected undiscounted future cash flows. The company
expenses the costs of start-up activities as incurred.
Financial Instruments
The carrying amounts for cash, receivables and accounts payable approximate
fair value due to the short-term nature of these instruments. Other fair-value
disclosures are in the respective notes.
In order to decrease its exposure to unfavorable interest rate movements,
the Company has from time to time purchased interest rate protection agreements
to cap the interest rates on its floating rate obligations. The purchase price
of the interest rate protection agreements is capitalized and amortized over
the life of the agreement. Amortization of the purchase price is charged to
interest expense.
Accident and Cargo Claims
The Company is self-insured or maintains high deductible insurance policies
for a significant portion of its accident and cargo claims. Reserves are
provided for uninsured cargo claims and for the uninsured costs of personal
injury and property damage as a result of vehicle accidents involving the
network of independent owner-operator drivers. Reserves are based on the
Company's best estimate of its expected loss. Actual losses, if not covered by
insurance, at amounts significantly greater than the recorded amounts could
have a material adverse impact on the Company's financial position and results
of operations.
F-27
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition
Revenues and related expenses are recognized when shipment is complete.
Net Revenues
Net revenues represent transportation and service revenues net of associated
transportation and service costs.
Transaction Costs
For the year ended December 31, 1998, the Company incurred approximately
$1.5 million of costs associated with the preparation and filing of a
registration statement on Form S-1 related to an initial public offering (IPO)
of common stock. The IPO was not completed due to uncertainties in the equity
markets at the time of the proposed offering; accordingly, the costs were
charged off in 1998. The Company may consider an IPO in the future, but has no
plans for such an offering at this time. The Predecessor incurred transaction
costs of $0.5 million in connection with the sale of PMT primarily related to
legal and financial advisory services.
Income Taxes
Income taxes are recognized utilizing the asset and liability method, under
which deferred income taxes are recognized for the consequences of temporary
differences by applying currently enacted statutory rates to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities.
Earnings per Share
Basic earnings per share were calculated by dividing net income available
for common shareholders by the weighted average number of shares of common
stock outstanding during the period. Diluted earnings per share include the
impact of common stock options and warrants outstanding. Earnings per share for
all periods and all share data reflect the Company's 9.5-to-1 stock split,
which occurred in December 1998.
Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." As permitted by SFAS No. 123, the Company adopted
the disclosure provisions of this statement in 1997.
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards to measure all
changes in equity that result from transactions and other economic events other
than transactions with owners. Comprehensive income is the total of net income
and all other nonowner changes in equity. Except for net income, the Company
does not have any transactions and other economic events that qualify as
comprehensive income as defined under SFAS No. 130.
New Accounting Pronouncements
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 modifies the method of
accounting for derivative instruments. The Company will adopt SFAS No. 133 in
2000. The adoption of SFAS No. 133 will require the Company to modify its
accounting for its interest rate hedging activities. Based on information
currently available, the Company does not expect the adoption of SFAS No. 133
to have a significant impact on its financial position or results of
operations.
F-28
<PAGE>
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:
<TABLE>
<CAPTION>
The
The Company Predecessor
------------------------- --------------
December 31, December 31, March 31,
1998 1997 1997
------------ ------------ --------------
(in thousands) (in thousands)
<S> <C> <C> <C>
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
====== ====== =====
</TABLE>
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:
<TABLE>
<CAPTION>
The Company
-------------------------
December 31, December 31,
1998 1997
------------ ------------
(in thousands)
<S> <C> <C>
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
======= =======
</TABLE>
Amortization expense for the year ended December 31, 1998, and for the
period from inception through December 31, 1997, was $1.3 million and $0.3
million, respectively.
F-29
<PAGE>
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:
<TABLE>
<CAPTION>
Stutz PLMC
April Cross Con July MCS
3, June 5, 25, December 9,
1998 1998 1998 1998
------ --------- ------- -----------
(in thousands)
<S> <C> <C> <C> <C>
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
====== ======= ======= ========
</TABLE>
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:
<TABLE>
<CAPTION>
PMT Interstate
March 31, December 16,
1997 1997
--------- ------------
(in thousands)
<S> <C> <C>
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
======= ========
</TABLE>
F-30
<PAGE>
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).
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
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
========= ========= ========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
The Company The Predecessor
----------------------------------- ---------------
December 31, 1998 December 31, 1997 March 31, 1997
----------------- ----------------- ---------------
(in thousands) (in thousands)
<S> <C> <C> <C>
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
======= ====== ======
</TABLE>
F-31
<PAGE>
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):
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
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
======= =======
</TABLE>
On December 7, 1998, the Company entered into a new term loan of $32 million
and revolving credit facility of $38 million. The purpose of the new term loan
and revolving credit facility was to finance acquisitions, to provide for
letters of credit, and for working capital and other general corporate
purposes. In conjunction with the issuance of the term loan of $32 million and
revolving credit facility, the amounts outstanding under the term loan of $20
million and the $12 million revolving line of credit were repaid (see Note 13).
As of December 31, 1998, the Company had $17.6 million of unused commitments
under its revolving credit facility. Interest expense was $2.9 million and $0.7
million for the year ended December 31, 1998, and the nine months ended
December 31, 1997, respectively.
The term loan and revolving credit facility agreements require that the
Company meet certain covenants that, among other things, require maintenance of
ratios related to fixed charges and leverage, require a minimum consolidated
net worth, and limit the level of capital expenditures. At December 31, 1998,
the Company was in compliance with the covenants of the agreements.
The promissory note to shareholders represents the cash portion of the
purchase price of the Interstate acquisition owed to the former owners of
Interstate, who became shareholders of PMT Holdings on December 16, 1997. The
amount was paid to these shareholders on January 2, 1998, and was financed by a
term loan of $20 million. During the first half of 1998, the Company amended
its term loan of $20 million and the revolving
F-32
<PAGE>
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:
<TABLE>
<CAPTION>
Debt Leases Total
------- ------ -------
(in thousands)
<S> <C> <C> <C>
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
======= ==== =======
</TABLE>
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:
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
Current:
Federal............... $2,992 $706 $(144) $1,277
State and local....... 665 125 -- 264
------ ---- ----- ------
3,657 831 (144) 1,541
------ ---- ----- ------
Deferred:
Federal............... (387) 128 206 291
State and local....... (88) 24 12 56
------ ---- ----- ------
(475) 152 218 347
------ ---- ----- ------
Total provision..... $3,182 $983 $ 74 $1,888
====== ==== ===== ======
F-33
<PAGE>
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:
</TABLE>
<TABLE>
<CAPTION>
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
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
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%
==== ==== ==== ====
</TABLE>
Deferred tax assets and liabilities are composed of the following:
<TABLE>
<CAPTION>
The
The Company Predecessor
------------------------- --------------
December 31, December 31, March 31,
1998 1997 1997
------------ ------------ --------------
(in thousands) (in thousands)
<S> <C> <C> <C>
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 $ --
===== ===== ====
</TABLE>
The Predecessor was included in the federal and state consolidated tax
returns of UP and its subsidiaries prior to inception. The Company believes
that tax expense recorded by the Predecessor approximates what would have been
recorded had the Predecessor filed separate tax returns.
10. STOCKHOLDERS' EQUITY:
Preferred Stock
The Company has one class of $0.01 par value Series A Preferred Stock
(preferred stock). Holders of the preferred stock are entitled to receive
dividends in cash at the per annum rate of 12 percent of the original issuance
price of a preferred share as, if and when declared by the Board of Directors
of the Company at its sole discretion. So long as any shares of preferred stock
are outstanding, the Company may not pay or declare any dividend on or with
respect to any shares of common stock. Upon liquidation, the holders of
preferred stock are entitled to receive, prior and in preference to any
distribution to any holder of common stock, for each share of preferred stock,
an amount per share equal to the original issuance price of such share, plus
the aggregate amount of all dividends declared, if any, less the aggregate
amount of all distributions, including payments of dividends. In general, the
holders of preferred stock are not entitled to vote on any matters submitted to
the vote of stockholders except as set forth in the Company's Certificate of
Incorporation. Additionally, upon the closing of an initial public offering by
the Company, each share of preferred stock automatically converts to shares of
common stock based on the ratio of preferred stock original issuance price
divided by the initial public offering price of common stock.
F-34
<PAGE>
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.
<TABLE>
<CAPTION>
1998
-----------------------
Weighted
Average Exercise
Shares Price
------ ----------------
<S> <C> <C>
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
====== =====
</TABLE>
No options were exercised, forfeited or expired during the year.
F-35
<PAGE>
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:
<TABLE>
<CAPTION>
Options Weighted Average Weighted Average
Outstanding at Remaining Fair Value of
Exercise Price December 31, 1998 Contractual Life Options Granted
-------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
$9.47 26,695 6 years $3.83
</TABLE>
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.
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
Weighted Weighted
Average Exercise Average Exercise
Options Price Options Price
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
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
======= ====== ======= ======
</TABLE>
No options were exercised, forfeited or expired from inception through
December 31, 1998.
F-36
<PAGE>
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:
<TABLE>
<CAPTION>
Options Weighted Average Weighted Average
Outstanding at Remaining Fair Value of
Exercise Price December 31, 1998 Contractual Life Options Granted
-------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
$11.24 70,000 2.5 years $0.47
$40.00 40,000 6.0 years $ --
</TABLE>
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:
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, December 31,
1998 1997
------------ ------------
(in thousands, except
per share amounts)
<S> <C> <C>
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
====== ======
</TABLE>
Options to purchase 26,695 and 40,000 common shares were excluded from the
computation of diluted earnings per share for the periods ended December 31,
1998 and 1997, respectively, because the options' exercise price was greater
than the average market price of the common shares. Subsequent to December 31,
1998, options were granted for the purchase of 57,500 shares.
As a result of the acquisition of the Predecessor by the Company, earnings
per share are not comparable and have therefore not been presented for the
Predecessor.
13. EXTRAORDINARY LOSS:
The Company refinanced its debt in connection with the acquisition of MCS on
December 9, 1998. The term loan fees of $0.4 million, net of income taxes of
$0.2 million, were recorded in the accompanying statement of operations for the
year ended December 31, 1998, as an extraordinary loss.
F-37
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the acquisition of Interstate on December 16, 1997, loan
fees of $0.2 million were written off in connection with the early
extinguishment of debt. The loan fees, net of income taxes of $0.1 million,
were recorded in the accompanying statement of operations for the nine months
ended December 31, 1997, as an extraordinary loss.
14. RELATED-PARTY TRANSACTIONS:
During the period from inception through December 31, 1997, the Company paid
$75,000 in management fees and $100,000 in acquisition-related consulting fees
to Eos. Under an Amended and Restated Management Consulting Agreement dated as
of December 16, 1997, between the Company and Eos Management, Inc. (EMI), the
Company pays EMI a monthly management fee of $10,417 for management consulting
services rendered to the Company. The management fee is payable whether or not
EMI has performed any services during the term of the agreement. The Company
provided over-the-road transportation services and purchased linehaul
transportation services from UP and its subsidiaries of $6.1 million and $5.8
million, respectively, for the nine months ended December 31, 1997, and $13.0
million and $16.6 million, respectively, for the year ended December 31, 1998.
All services are provided and purchased at quoted market rates.
The Predecessor provided over-the-road transportation services and purchased
linehaul transportation services from UP and its subsidiaries. During the
three-month period ended March 31, 1997, and the year ended December 31, 1996,
revenues earned by the Predecessor from UP and its subsidiaries related to
over-the-road transportation services were $2.2 million and $4.8 million,
respectively. Purchased transportation costs from UP and its subsidiaries were
$2.7 million for the three-month period ended March 31, 1997, and $13.5 million
for the year ended December 31, 1996.
Prior to its acquisition, the Predecessor participated in benefit plans and
the other employee benefit services provided by UP and its affiliates (see Note
15). UP and its affiliates also provided tax advice; tax return preparation
services; corporate secretarial services; legal advice; treasury, banking, cash
management and accounting services; services involving the acquisition of
insurance coverage and related services, all at no cost to the Predecessor.
Additionally, the Predecessor from time to time advanced excess cash to UP
(Note 4).
The Company leases a facility consisting of office, warehousing and trucking
space from A&G Investments, a California general partnership of which Messrs.
Goldfein and Steiner are the only partners. Mr. Goldfein is a stockholder and a
Director and Executive Vice President of the Company. Mr. Steiner is a
stockholder and an Executive Vice President of the Company. Lease payments were
$0.5 million for the year ended December 31, 1998, and $17,000 for the nine
months ended December 31, 1997.
Cross Con leases a facility consisting of office space from Richard P.
Hyland, a stockholder and an Executive Vice President of the Company. Such
lease is pursuant to an oral agreement and is on a month-to-month basis. Lease
payments were $0.1 million for the year ended December 31, 1998.
Pursuant to an Operations Agency Agreement, TEK, Incorporated (TEK) is
entitled to 65 percent of the gross profit on Terminals' Detroit office. TEK is
owned by a brother of Richard Hyland, a stockholder and an Executive Vice
President of the Company. In 1998, TEK received $0.6 million pursuant to such
agreement.
Pursuant to an oral Commission/Bonus Agreement with a brother of Richard
Hyland, such brother is entitled to 30 percent of the net profits before tax of
the California office of Cross Con. In 1998, $0.1 million was paid pursuant to
such agreement.
F-38
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. EMPLOYEE BENEFITS:
Prior to its acquisition, eligible employees of the Predecessor participated
in the pension and postretirement benefit plans of its parent. The Predecessor
recorded benefit charges related to these plans of $0 for the period ended
March 31, 1997, and $266,000 for the year ended December 31, 1996, for its
proportionate share of the benefit plans as directed by its parent. In
connection with the purchase of PMT by PMT Holdings, active participants of the
plans became fully vested in their benefits accrued to date and the obligation
was assumed by UP.
The Company adopted two 401(k) plans (the Plans) in 1997. A plan was adopted
for PMT employees in July 1997 and for rail service employees in October 1997.
All employees who meet certain service requirements are eligible to
participate. The Company matched 100 percent of the first 3 percent contributed
by employees to the Plans during the years ended December 31, 1998 and 1997. In
addition, the Company maintains a 401(k) plan for Interstate employees. The
Company matched 25 percent of the first 4 percent contributed by Interstate
employees to the plan during the year ended December 31, 1998, and the nine
months ended December 31, 1997. Total expense related to these plans was $0.2
million for the year ended December 31, 1998, and for the nine months ended
December 31, 1997.
16. COMMITMENTS AND CONTINGENCIES:
Legal Proceedings and Contingencies
The Company is a party to various legal proceedings, claims and assessments
arising in the normal course of its business activities. Interstate is a named
defendant in a class action filed in July 1997 in the State of California, Los
Angeles Superior Court, Central District, alleging, among other things, breach
of fiduciary duty, unfair business practices, conversion and money had and
received in connection with monies allegedly wrongfully deducted from truck
drivers' earnings. Plaintiffs have demanded in excess of $8.8 million, together
with unspecified punitive damages, costs and interest, as well as equitable
relief. Interstate has entered into a Judge Pro Tempore Submission Agreement
dated as of October 9, 1998, pursuant to which the plaintiffs and defendants
have waived their rights to a jury trial, stipulated to a certified class, and
agreed to a minimum and a maximum judgment amount. The Company intends to
defend this action vigorously and believes that its defenses are meritorious.
Based upon information presently available and in light of legal and other
defenses and insurance coverage, management does not expect these legal
proceedings, claims and assessments, individually or in the aggregate, to have
a material adverse impact on the Company's consolidated financial position or
results of operations.
Operating Lease Commitments
The Company leases office space and equipment under noncancellable lease
agreements that expire at various dates. The rental expense under these lease
agreements was $1.8 million for the year ended December 31, 1998.
F-39
<PAGE>
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):
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1999............................................................... $1,650
2000............................................................... 1,389
2001............................................................... 1,071
2002............................................................... 970
2003............................................................... 934
Thereafter......................................................... 2,745
------
Total minimum lease payments..................................... $8,759
======
</TABLE>
Employment Agreements
The Company has entered into employment agreements with certain of its
executive officers, with remaining service periods ranging from 1 to 2.5 years.
The agreements provide for certain payments to each officer upon termination of
employment, other than as a result of death, disability in most cases or
justified cause, as defined. The aggregate estimated commitment under these
agreements was $3.9 million and $2.8 million at December 31, 1998 and 1997,
respectively. Under the employment agreements, the Board of Directors may award
an annual bonus to certain of the executives in an amount up to $0.1 million
each based on the attainment of certain operating income targets.
17. SUBSEQUENT EVENTS:
On February 2, 1999, the Company entered into an Equipment Purchase
Agreement and a Bill of Sale and Assignment with Comtrak, Inc. to sell fifty
1999 Model 9400 International tractors purchased as part of the MCS
acquisition. The proceeds from the sale of $3.0 million were used to pay off
the note payable of $2.8 million described in Note 8. There was no gain or loss
recorded on the sale.
EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT
As of May 28, 1999, the Company and its stockholders entered into an
Agreement and Plan of Merger with an affiliate of Apollo Management L.P.
(together with its affiliates, Apollo) pursuant to which, among other things,
Apollo acquired all of the outstanding Company common stock held by Eos and a
portion of the outstanding Company common stock held by the other stockholders
of the Company, constituting in the aggregate approximately 60 percent of the
outstanding Company common stock, in exchange for cash paid to such selling
stockholders. The consummation of the merger was subject to the satisfaction of
various conditions, including Apollo's obtainment of sufficient financing. Upon
consummation of the merger, the Company was renamed Pacer Logistics, Inc.
On April 20, 1999, the Company acquired certain assets of Keystone
Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) ("Keystone") for $8.25
million. Keystone, which was established in 1964, is an intermodal marketing
company with strong westbound traffic flow that originates in northeastern
United States. The acquisition was financed through borrowings under the
Company's revolving line of credit.
F-40
<PAGE>
PACER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, 1999 December 31, 1998
-------------- -----------------
(In thousands, except share
data)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 10 $ 10
Accounts receivable, net of allowances of
$2,070 and $2,032, respectively............. 41,492 41,566
Prepaid expenses and other................... 1,926 1,644
Deferred income taxes........................ 597 597
-------- --------
Total current assets.................... 44,025 43,817
-------- --------
PROPERTY AND EQUIPMENT:
Property and equipment, at cost.............. 5,323 7,926
Accumulated depreciation..................... (1,170) (852)
-------- --------
Property and equipment, net............. 4,153 7,074
-------- --------
OTHER ASSETS:
Intangible assets, net....................... 60,932 61,788
Deferred income taxes........................ 73 73
Other assets................................. 1,885 1,119
-------- --------
Total assets............................ $111,068 $113,871
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and
capital leases.............................. $ 3,294 $ 2,803
Accounts payable............................. 24,386 23,429
Accrued expenses............................. 14,275 17,179
Income taxes payable......................... 537 --
Deferred income taxes........................ -- --
-------- --------
Total current liabilities............... 42,492 43,411
LONG-TERM LIABILITIES:
Employee benefits............................ 710 672
Long-term debt and capital leases............ 47,064 50,456
-------- --------
Total liabilities....................... 90,266 94,539
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock at March 31, 1999 and
December 31, 1998: $0.01 par value, 600,000
shares authorized, 350,000 shares issued and
outstanding................................. 4 4
Common stock at March 31, 1999 and December
31, 1998: $0.0001 par value, 20,000,000
shares authorized, 5,437,392 shares issued
and outstanding............................. 1 1
Warrants at March 31, 1999 and December 31,
1998: 18,421 outstanding 53 53
Additional paid-in capital................... 14,201 14,201
Retained earnings............................ 6,543 5,073
-------- --------
Total stockholders' equity.............. 20,802 19,332
-------- --------
Total liabilities and stockholders'
equity................................. $111,068 $113,871
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE>
PACER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------ ------------------
(In thousands)
<S> <C> <C>
REVENUES................................. $ 89,892 $ 50,362
COST OF PURCHASED TRANSPORTATION AND
SERVICES................................ (75,164) (42,003)
-------- --------
Net revenues........................... 14,728 8,359
OPERATING EXPENSES:
Selling, general and administrative
expenses.............................. 10,268 5,634
Depreciation and amortization.......... 764 341
-------- --------
Income from operations............... 3,696 2,384
INTEREST EXPENSE (INCOME)................ 1,126 554
-------- --------
Income before income tax provision....... 2,570 1,830
INCOME TAX PROVISION..................... 1,100 765
-------- --------
Net income............................... $ 1,470 $ 1,065
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE>
PACER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------ ------------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 1,470 $ 1,065
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities
Depreciation and amortization.......... 764 341
Deferred income taxes.................. -- (29)
Changes in operating assets and
liabilities:
Decrease in accounts receivable, net
of allowances....................... 74 852
Decrease (increase) in prepaid
expenses and other.................. (281) 118
Decrease (increase) in other assets.. (287) 5
Increase in accounts payable......... 956 800
Increase (decrease) in accrued
expenses............................ (2,292) (501)
Increase in income taxes payable..... 537 48
Increase in employee benefits........ 38 6
------- -------
Net cash provided by operating
activities.......................... 979 2,705
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.... (408) (387)
Proceeds from equipment sales.......... 3,035 --
------- -------
Net cash provided by (used in)
investing activities................ 2,627 (387)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdrafts........................ (705) --
Proceeds on long-term debt............. 4,740 1,202
Principal payments on long-term debt... (7,641) (3,519)
------- -------
Net cash used in financing
activities.......................... (3,606) (2,317)
------- -------
NET INCREASE IN CASH AND
CASH EQUIVALENTS........................ -- 1
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................... 10 86
------- -------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD.................................. $ 10 $ 87
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE>
PACER INTERNATIONAL, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF INTERIM PERIOD PRESENTATION
The unaudited interim financial statements as of March 31, 1999 and for the
three months ended March 31, 1999 and March 31, 1998 are condensed and do not
contain all information required by generally accepted accounting principles to
be included in a full set of financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
necessary for fair presentation have been included. The results of operations
for any interim period are not necessarily indicative of the results of
operations to be expected for any full fiscal year. The audited financial
statements of Pacer International, Inc., ("Pacer International") presented
elsewhere in this document, include a summary of significant accounting
policies and should be read in conjunction with these interim financial
statements.
2. SUBSEQUENT EVENTS
Pacer International, Inc. entered into an agreement dated February 22, 1999
with Apollo Management, L.P. ("Apollo") through a wholly-owned subsidiary in
which Apollo agreed to acquire a controlling interest in Pacer International.
Consideration of $46 million in cash and $26 million of the surviving
corporation's common stock was payable to Pacer International Stockholders. The
transaction closed on May 28, 1999. In connection with the transaction, Pacer
International Inc. was renamed Pacer Logistics, Inc.
On April 20, 1999, Pacer International acquired certain assets of Keystone
Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) ("Keystone") for $8.25
million. Keystone, which was established in 1964, is an intermodel marketing
company with strong westbound traffic flow that originates in the northeastern
United States. The acquisition was financed through borrowings under Pacer
International's revolving line of credit.
3. CONTINGENCIES
Pacer International is a party to various legal proceedings, claims and
assessments arising in the normal course of its business activities. Interstate
is a named defendant in a class action filed in July 1997 in the State of
California, Los Angeles Superior Court, Central District, alleging, among other
things, breach of fiduciary duty, unfair business practices, conversion and
money had and received in connection with monies allegedly wrongfully deducted
from truck drivers' earnings. Plaintiffs have demanded in excess of $8.8
million, together with unspecified punitive damages, costs and interest, as
well as equitable relief. Interstate has entered into a Judge Pro Tempore
Submission Agreement dated as of October 9, 1998, pursuant to which the
plaintiffs and defendants have waived their rights to a jury trial, stipulated
to a certified class, and agreed to a minimum and a maximum judgement amount.
Pacer International intends to defend this action vigorously and believes that
its defenses are meritorious. Based upon information presently available and in
light of legal and other defenses and insurance coverage, management does not
expect these legal proceedings, claims and assessments, individually or in
aggregate, to have a material adverse impact on the Pacer International's
consolidated financial position or results of operations.
F-44
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All tendered old notes, executed letters of transmittal and other related
documents should be directed to the exchange agent. Questions and requests for
assistance and requests for additional copies of the prospectus, the letter of
transmittal and other related documents should be addressed to the exchange
agent as follows:
By Registered or Certified Mail:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration
By Hand Delivery before 4:30 p.m.:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration
By Overnight Courier and by Hand Delivery
after 4:30 p.m. on the Expiration Date:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attn: Corporate Trust Administration
Facsimile Transmission:
(302) 651-8882
Attn: Customer Service
Information or Confirmation by Telephone:
(302) 651-8681
Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight delivery, or registered or certified mail.
---------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation not contained in this prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by Pacer International. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of Pacer International since such date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-----------------------
PROSPECTUS
-----------------------
[LOGO]
Pacer International, Inc.
$150,000,000
$150,000,000 11 3/4% Senior
Subordinated Notes due 2007
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Amended and Restated Charter of Pacer International, Inc. (the "Pacer
International Charter") states that Pacer International shall, to the full
extent permitted by the Tennessee Business Corporation Act (the "TBCA"), as
amended or interpreted from time to time, indemnify all directors, officers and
employees whom it may indemnify pursuant thereto and, in addition, Pacer
International may, to the extent permitted by the TBCA, indemnify agents of
Pacer International or other persons.
Sections 48-18-501 through 48-18-509 of the TBCA permit indemnification of
directors, officers, and employees for reasonable expenses incurred in a wholly
successful defense of any proceeding or when the relevant circumstances so
dictate. The corporation may also indemnify a director made a party to a
proceeding against liability incurred in the proceeding so long as the director
acted in good faith and his conduct was in the best interests, or at least not
opposed to the best interests, of the corporation. Section 48-18-509 of the
TBCA also provides that the indemnification provided for therein shall not be
deemed exclusive of any other rights to which those seeking indemnification may
otherwise be entitled. In addition, Pacer International maintains a director's
and officer's liability insurance policy.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1 Amended and Restated Charter of Pacer International, Inc.
3.2 Amended and Restated Bylaws of Pacer International, Inc.
4.1 Credit Agreement, dated as of May 28, 1999, among Pacer
International, Inc., the lenders party thereto from time to time,
Morgan Stanley Senior Funding, Inc., as Syndication Agent, Credit
Suisse First Boston Corporation, as Documentation Agent and
Bankers Trust Company, as Administrative Agent.
4.2 Indenture, dated as of May 28, 1999, among Pacer International,
Inc., the Guarantors and Wilmington Trust Company, as Trustee
(including form of 11 3/4% Senior Subordinated Notes due 2007).
4.3 Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part
of Exhibit 4.2).
4.4 Stock Purchase Agreement, dated as of March 15, 1999, between APL
Limited and Coyote Acquisition LLC.
4.5 Non-Competition Agreement, dated as of May 28, 1999, among Neptune
Orient Lines Limited, APL Limited, Pacer International, Inc. and
Coyote Acquisition LLC.
4.6 Administrative Services Agreement, dated as of May 28, 1999,
between APL Limited and Pacer International, Inc.
4.7 IT Supplemental Agreement, dated as of May 11, 1999, between APL
Limited, APL Land Transport Services, Inc. and Coyote Acquisition
LLC.*
4.8 Stacktrain Services Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
and Pacer International, Inc.
4.9 TPI Chassis Sublet Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
and Pacer International, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.10 Equipment Supply Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
and Pacer International, Inc.
4.11 Primary Obligation and Guaranty Agreement, dated as of March 15,
1999, by Neptune Orient Lines Limited in favor of Coyote
Acquisition LLC and APL Land Transport Services, Inc.
4.12 Shareholders' Agreement, dated as of May 28, 1999, among APL
Limited, Pacer International, Inc., Coyote Acquisition LLC and
Coyote Acquisition II LLC.
4.13 Shareholders' Agreement, dated as of May 28, 1999, by and among
Pacer International, Inc., Coyote Acquisition LLC, Coyote
Acquisition II LLC and the Management Stockholders.
4.14 Shareholders' Agreement, dated as of May 28, 1999, by and among
Pacer International, Inc., Coyote Acquisition LLC, Coyote
Acquisition II LLC, BT Capital Investors, L.P. and Pacer
International Equity Investors, LLC.
4.15 Management Agreement, dated as of May 28, 1999, between Apollo
Management IV, L.P. and Pacer International, Inc.
4.16 Tax Sharing Agreement, dated as of May 28, 1999, by and among
Coyote Acquisition LLC, Pacer International, Inc. and Pacer
Logistics, Inc.
4.17 Purchase Agreement, dated as of May 24, 1999, among Pacer
International, Inc., the Guarantors and the Placement Agents
named therein.
4.18 Registration Rights Agreement, dated as of May 28, 1999, between
Pacer International, Inc., and the Purchasers named therein.
4.19 Form of Joinder Agreement, dated as of May 24, 1999, between
Coyote Acquisition LLC and the Placement Agents named therein
(filed as part of Exhibit 4.17).
4.20 Intermodal Transportation Agreement No. 1111, dated as of May 4,
1999, between CSX Intermodal, Inc., APL Land Transport Services,
Inc., APL Limited and APL Co. Pte. LTD.*
4.21 Domestic Incentive Agreement, dated as of May 4, 1999, between CSX
Intermodal, Inc. and Pacer International, Inc.*
4.22 Rail Transportation Agreement, dated as of October 11, 1996,
between Union Pacific Railroad Company, APL Land Transport
Services, Inc., American President Lines, LTD., and APL Co. Pte.
LTD.*
5.1 Opinion of Dewey Ballantine LLP as to the legality of the
securities being registered.
10.1 Employment Agreement for Donald C. Orris.
10.2 Employment Agreement for Gerry Angeli.
10.3 Employment Agreement for Gary I. Goldfein.
10.4 Employment Agreement for Robert L. Cross.
10.5 Employment Agreement for Allen E. Steiner.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
16.1 Letter re: change in certifying accountant.
21.1 List of the Subsidiaries of Pacer International, Inc.
23.1 Consent of Dewey Ballantine LLP (included as part of its opinion
filed as Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
25.1 Form T-1 Statement of Eligibility of Trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- --------
* To be filed by amendment
II-2
<PAGE>
Item 22. Undertakings.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
4. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
II-3
<PAGE>
5. The undersigned registrant hereby undertakes to supply by means of post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it becomes effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer International, Inc.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman, President and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints and , and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him or her and in his or her name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to the Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
each said attorney-in-fact and agents or any of them or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman, President and July 30, 1999
______________________________________ Chief Executive Officer
Donald C. Orris
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Vice President, Controller July 30, 1999
______________________________________ and Secretary
Joseph P. Atturio
/s/ Joshua J. Harris Director July 30, 1999
______________________________________
Joshua J. Harris
/s/ Bruce H. Spector Director July 30, 1999
______________________________________
Bruce H. Spector
/s/ Marc E. Becker Director July 30, 1999
______________________________________
Marc E. Becker
/s/ Timothy J. Rhein Director July 30, 1999
______________________________________
Timothy J. Rhein
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer Logistics, Inc.
By:/s/ Donald C. Orris
----------------------------------
Donald C. Orris
Chairman, President and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Donald C. Orris Chairman, President and July 30, 1999
___________________________________________ Chief Executive Officer
Donald C. Orris
/s/ Gary I. Goldfein Executive Vice President July 30, 1999
___________________________________________ and Director
Gary I. Goldfein
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
___________________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Vice President, Controller July 30, 1999
___________________________________________ and Secretary
Joseph P. Atturio
/s/ Joshua J. Harris Director July 30, 1999
___________________________________________
Joshua J. Harris
/s/ Marc E. Becker Director July 30, 1999
___________________________________________
Marc E. Becker
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Cross Con Transport, Inc.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Richard P. Hyland President, Chief Executive July 30, 1999
______________________________________ Officer, Assistant
Richard P. Hyland Secretary and Assistant
Treasurer
/s/ Lawrence C. Yarberry Chief Financial Officer, July 30, 1999
______________________________________ Secretary and Treasurer
Lawrence C. Yarberry
/s/ Gerry Angeli Director July 30, 1999
______________________________________
Gerry Angeli
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Cross Con Terminals, Inc.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Richard P. Hyland President, Chief Executive July 30, 1999
______________________________________ Officer, Assistant
Richard P. Hyland Secretary and Assistant
Treasurer
/s/ Lawrence C. Yarberry Chief Financial Officer, July 30, 1999
______________________________________ Secretary and Treasurer
Lawrence C. Yarberry
/s/ Gerry Angeli Director July 30, 1999
______________________________________
Gerry Angeli
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer International Rail Services
LLC
By:Pacer Logistics, Inc.
Its Managing Member
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman, President and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman, President and July 30, 1999
______________________________________ Chief Executive Officer
Donald C. Orris
/s/ Gary I. Goldfein Executive Vice President July 30, 1999
______________________________________ and Director
Gary I. Goldfein
/s/ Joshua J. Harris Director July 30, 1999
______________________________________
Joshua J. Harris
/s/ Marc E. Becker Director July 30, 1999
______________________________________
Marc E. Becker
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer International Consulting LLC
Pacer Logistics, Inc.
By: ___________________________________
Its Managing Member
/s/ Donald C. Orris
By: ___________________________________
Donald C. Orris
Chairman, President and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Donald C. Orris, his
or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him or her and in his or her name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to the Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite or necessary fully to all intents and purposes as he or
she might or could do and perform each and every act and thing requisite or
necessary fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman, President and July 30, 1999
______________________________________ Chief Executive Officer
Donald C. Orris
/s/ Gary I. Goldfein Executive Vice President July 30, 1999
______________________________________ and Director
Gary I. Goldfein
/s/ Joshua J. Harris Director July 30, 1999
______________________________________
Joshua J. Harris
/s/ Marc E. Becker Director July 30, 1999
______________________________________
Marc E. Becker
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer Rail Services llc
Pacer Logistics, Inc.
By: ___________________________________
Its Managing Member
/s/ Donald C. Orris
By: ___________________________________
Donald C. Orris
Chairman, President and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Donald C. Orris, his
or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him or her and in his or her name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to the Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite or necessary fully to all intents and purposes as he or
she might or could do and perform each and every act and thing requisite or
necessary fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman, President and July 30, 1999
______________________________________ Chief Executive Officer
Donald C. Orris
/s/ Gary I. Goldfein Executive Vice President July 30, 1999
______________________________________ and Director
Gary I. Goldfein
/s/ Joshua J. Harris Director July 30, 1999
______________________________________
Joshua J. Harris
/s/ Marc E. Becker Director July 30, 1999
______________________________________
Marc E. Becker
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacific Motor Transport Company
By:__________________________________
/s/ Donald C. Orris
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Gerry Angeli President, Chief Executive July 30, 1999
______________________________________ Officer and Director
Gerry Angeli
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer Express, Inc.
By:__________________________________
/s/ Donald C. Orris
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Gary I. Goldfein President, Chief Executive July 30, 1999
______________________________________ Officer and Director
Gary I. Goldfein
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Pacer Integrated Logistics, Inc.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Gerry Angeli President Chief Executive July 30, 1999
______________________________________ Officer, and director
Gerry Angeli
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
PLM Acquisition Corporation
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Robert L. Cross Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Robert L. Cross and Treasurer
/s/ Lawrence C. Yarberry Vice President, Chief July 30, 1999
______________________________________ Financial Officer,
Lawrence C. Yarberry Secretary and Treasurer
/s/ Gerry Angeli Director July 30, 1999
______________________________________
Gerry Angeli
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Manufacturers Consolidation Service,
Inc.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Donald C. Orris, his or
her true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution for him or her and in his or her name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Richard P. Hyland President and Chief July 30, 1999
______________________________________ Executive Officer
Richard P. Hyland
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
/s/ Gerry Angeli Director July 30, 1999
______________________________________
Gerry Angeli
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
LEVCON, INC.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Richard P. Hyland Chief Executive Officer July 30, 1999
______________________________________
Richard P. Hyland
/s/ Gerry Angeli Executive Vice President July 30, 1999
______________________________________ and Director
Gerry Angeli
/s/ Lawrence C. Yarberry Executive Vice President July 30, 1999
______________________________________ and Chief Financial
Lawrence C. Yarberry Officer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Manufacturers Consolidation Service
of Canada, Inc.
By:/s/ Donald C. Orris
----------------------------------
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
___________________________________________
Donald C. Orris
/s/ Richard P. Hyland President and Chief July 30, 1999
___________________________________________ Executive Officer
Richard P. Hyland
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
___________________________________________ Chief Financial Officer
Lawrence C. Yarberry and Assistant Secretary
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
___________________________________________
Joseph P. Atturio
/s/ Gerry Angeli Director July 30, 1999
___________________________________________
Gerry Angeli
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Interstate Consolidation Service,
Inc.
/s/ Donald C. Orris
By:__________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Gary I. Goldfein President, Chief Executive July 30, 1999
______________________________________ Officer and Director
Gary I. Goldfein
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Interstate Consolidation, Inc.
/s/ Donald C. Orris
By:__________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Gary I. Goldfein President, Chief Executive July 30, 1999
______________________________________ Officer and Director
Gary I. Goldfein
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Intermodal Container Service, Inc.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman July 30, 1999
______________________________________
Donald C. Orris
/s/ Gary I. Goldfein President, Chief Executive Officer, July 30, 1999
______________________________________ and Director
Gary I. Goldfein
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer and
Lawrence C. Yarberry Treasurer
/s/ Joseph P. Atturio Controller and Secretary July 30, 1999
______________________________________
Joseph P. Atturio
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Walnut Creek, State of
California, on July 30, 1999.
Keystone Terminals Acquisition Corp.
/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman, President and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Donald C. Orris, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do and perform each and every act and thing requisite or necessary fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald C. Orris Chairman, President and July 30, 1999
______________________________________ Chief Executive Officer
Donald C. Orris
/s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999
______________________________________ Chief Financial Officer
Lawrence C. Yarberry and Treasurer
/s/ Joseph P. Atturio Vice President, Controller July 30, 1999
______________________________________ and Secretary
Joseph P. Atturio
</TABLE>
II-22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1 Amended and Restated Charter of Pacer International, Inc.
3.2 Amended and Restated Bylaws of Pacer International, Inc.
4.1 Credit Agreement, dated as of May 28, 1999, among Pacer
International, Inc., the lenders party thereto from time to time,
Morgan Stanley Senior Funding, Inc., as Syndication Agent, Credit
Suisse First Boston Corporation, as Documentation Agent and
Bankers Trust Company, as Administrative Agent.
4.2 Indenture, dated as of May 28, 1999, among Pacer International,
Inc., the Guarantors and Wilmington Trust Company, as Trustee
(including form of 11 3/4% Senior Subordinated Notes due 2007).
4.3 Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part
of Exhibit 4.2).
4.4 Stock Purchase Agreement, dated as of March 15, 1999, between APL
Limited and Coyote Acquisition LLC.
4.5 Non-Competition Agreement, dated as of May 28, 1999, among Neptune
Orient Lines Limited, APL Limited, Pacer International, Inc. and
Coyote Acquisition LLC.
4.6 Administrative Services Agreement, dated as of May 28, 1999,
between APL Limited and Pacer International, Inc.
4.7 IT Supplemental Agreement, dated as of May 11, 1999, between APL
Limited, APL Land Transport Services, Inc. and Coyote Acquisition
LLC.*
4.8 Stacktrain Services Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
and Pacer International, Inc.
4.9 TPI Chassis Sublet Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
and Pacer International, Inc.
4.10 Equipment Supply Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
and Pacer International, Inc.
4.11 Primary Obligation and Guaranty Agreement, dated as of March 15,
1999, by Neptune Orient Lines Limited in favor of Coyote
Acquisition LLC and APL Land Transport Services, Inc.
4.12 Shareholders' Agreement, dated as of May 28, 1999, among APL
Limited, Pacer International, Inc., Coyote Acquisition LLC and
Coyote Acquisition II LLC.
4.13 Shareholders' Agreement, dated as of May 28, 1999, by and among
Pacer International, Inc., Coyote Acquisition LLC, Coyote
Acquisition II LLC and the Management Stockholders.
4.14 Shareholders' Agreement, dated as of May 28, 1999, by and among
Pacer International, Inc., Coyote Acquisition LLC, Coyote
Acquisition II LLC, BT Capital Investors, L.P. and Pacer
International Equity Investors, LLC.
4.15 Management Agreement, dated as of May 28, 1999, between Apollo
Management IV, L.P. and Pacer International, Inc.
4.16 Tax Sharing Agreement, dated as of May 28, 1999, by and among
Coyote Acquisition LLC, Pacer International, Inc. and Pacer
Logistics, Inc.
4.17 Purchase Agreement, dated as of May 24, 1999, among Pacer
International, Inc., the Guarantors and the Placement Agents
named therein.
4.18 Registration Rights Agreement, dated as of May 28, 1999, between
Pacer International, Inc., and the Purchasers named therein.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.19 Form of Joinder Agreement, dated as of May 24, 1999, between
Coyote Acquisition LLC and the Placement Agents named therein
(filed as part of Exhibit 4.17).
4.20 Intermodal Transportation Agreement No. 1111, dated as of May 4,
1999, between CSX Intermodal, Inc., APL Land Transport Services,
Inc., APL Limited and APL Co. Pte. LTD.*
4.21 Domestic Incentive Agreement, dated as of May 4, 1999, between CSX
Intermodal, Inc. and Pacer International, Inc.*
4.22 Rail Transportation Agreement, dated as of October 11, 1996,
between Union Pacific Railroad Company, APL Land Transport
Services, Inc., American President Lines, LTD., and APL Co. Pte.
LTD.*
5.1 Opinion of Dewey Ballantine LLP as to the legality of the
securities being registered.
10.1 Employment Agreement for Donald C. Orris.
10.2 Employment Agreement for Gerry Angeli.
10.3 Employment Agreement for Gary I. Goldfein.
10.4 Employment Agreement for Robert L. Cross.
10.5 Employment Agreement for Allen E. Steiner.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
16.1 Letter re: change in certifying accountant.
21.1 List of the Subsidiaries of Pacer International, Inc.
23.1 Consent of Dewey Ballantine LLP (included as part of its opinion
filed as Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
25.1 Form T-1 Statement of Eligibility of Trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- --------
* To be filed by amendment
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CHARTER
OF
PACER INTERNATIONAL, INC.
Pursuant to the provisions of Section 48-20-101 of the Tennessee
Business Corporation Act (the "Act"), the undersigned corporation adopts the
---
following amended and restated charter:
1. Name. The name of the corporation is Pacer International, Inc.
----
(the "Corporation").
-----------
2. Registered Office and Registered Agent. The address of the
--------------------------------------
registered office of the Corporation in Tennessee is CT Corporation System, 530
Knoxville, TN 37902, County Knox. The Corporation's registered agent at the
registered office is CT Corporation System
3. Principal Office. The address of the principal office of the
----------------
Corporation is 3746 Mt. Diablo Blvd., Suite 110, Lafayette, California 94549.
4. Corporation for Profit. The Corporation is for profit.
----------------------
5. Authorized Shares. The Corporation shall have authority, acting
-----------------
by its board of directors, to issue not more than twenty-one million
(21,000,000) shares divided into classes as follows:
(a) Twenty million (20,000,000) shares shall be shares of common
stock, each with a par value of one cent ($.01) ("Common Stock"). All shares of
------------
Common Stock shall be one and the same class and when issued shall have equal
rights of participation in dividends and assets of the Corporation and shall be
non-assessable. Each outstanding share of Common Stock shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders. There
shall be no cumulative voting of the Common Stock of the Corporation.
(b) One million (1,000,000) shares shall be shares of preferred
stock, each with a par value of one cent ($.01) ("Preferred Stock").
---------------
(i) The board of directors is hereby authorized to issue the
Preferred Stock from time to time in one or more series, which Preferred Stock
shall be preferred to the Common Stock as to dividends and distribution of
assets of the Corporation on dissolution, as hereinafter provided, and shall
have such distinctive designations as may be stated in the articles of amendment
providing for the issue of such stock adopted by the board of directors. In such
articles of amendment providing for the issuance of shares of each particular
series, the board of directors is hereby expressly authorized and empowered to
fix the number of shares constituting such series and to fix the relative rights
and preferences of the shares of the series so established to the full extent
allowable by law except insofar as such rights and preferences are fixed herein.
Such authorization in the board of directors shall expressly include the
authority to fix and determine the relative rights and preferences of such
shares in the following respects:
<PAGE>
(A) The rate of dividend;
(B) Whether shares can be redeemed or called and, if so, the
redemption or call price and terms and conditions of redemption or call;
(C) The amount payable upon shares in the event of voluntary
and involuntary liquidation;
(D) The purchase, retirement or sinking fund provisions, if
any, for the call, redemption or purchase of shares;
(E) The terms and conditions, if any, on which shares may be
converted into Common Stock or any other securities;
(F) Whether or not shares have voting rights, and the extent of
such voting rights, if any, including the number of votes per share; and
(G) Whether or not shares shall be cumulative, non-cumulative
or partially cumulative as to dividends and the dates from which any cumulative
dividends are to accumulate.
All shares of the Preferred Stock shall be of equal rank and shall be
identical, except in respect to the particulars that may be fixed by the board
of directors as hereinabove provided in this paragraph and which may vary among
the series. Different series of the Preferred Stock shall not be construed to
constitute different classes of stock for the purpose of voting by classes,
except when such voting by classes is expressly required by law.
(ii) The holders of Preferred Stock are entitled to receive, when
and as declared by the board of directors, but only from funds legally available
for the payment of dividends, cash dividends at the annual rate for each
particular series as theretofore fixed and determined by the board of directors
as hereinbefore authorized, and no more; such dividends to be payable before any
dividend on Common Stock shall be paid or set apart for payment arrearages in
the payment of dividends shall not bear interest.
(iii) In the event of any dissolution, liquidation or winding up of
the affairs of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of each series of
Preferred Stock shall be entitled to receive, out of the net assets of the
Corporation, an amount in cash for each share equal to the amount fixed and
determined by the board of directors in any articles of amendment providing for
the issue of any particular series of Preferred Stock, plus an amount equal to
any dividends payable to such holder which are then unpaid, either under the
provisions of the articles of amendment of the board of directors providing for
the issue of such series of Preferred Stock or by declaration of the board of
directors, on each such share up to the date fixed for distribution, and no
more, before any distribution shall be made to the holders of Common Stock.
Neither the merger or consolidation of the Corporation, nor the sale, lease or
conveyance of all or a part of its assets, shall be deemed to be a dissolution,
liquidation or winding up of the affairs of the Corporation.
2
<PAGE>
(c) 50,000 shares of Preferred Stock shall have the rights and
designations set forth below.
(i) Designation and Amount. The designation of the series of the
----------------------
preferred stock shall be "Series A Preferred Nonparticipating Pay-In-Kind
Stock", par value one cent ($.01) per share (the "Series A Preferred Stock").
------------------------
The number of authorized shares of Series A Preferred Stock shall be 50,000.
The Series A Preferred Stock shall be assigned a liquidation value of $1,000 per
share (the "Liquidation Value"). Capitalized terms used herein are defined in
-----------------
clause (xii) hereof.
(ii) Stock Dividends. (a) General Obligation. The holders of Series A
--------------- ------------------
Preferred Stock shall be entitled to receive when, as and if declared by the
board of directors and out of funds of the Corporation legally available
therefor, cumulative dividends for each share of Series A Preferred Stock
outstanding, from the Issue Date, at the annual rate of 7.5% of the Liquidation
Value per share and no more (the "Stock Dividend"). The Stock Dividend shall be
--------------
payable annually in arrears in additional shares of Series A Preferred Stock and
the number of shares (which may include fractions thereof) so delivered shall be
equal to the quotient of (x) the Stock Dividend, divided by (y) the Liquidation
Value. Stock Dividends shall accrue, without interest, from day to day (whether
or not the Corporation has earnings, there are funds legally available therefor
or such dividends are declared) and shall be fully cumulative. Stock Dividends,
if declared, shall be payable annually on the last Business Day (as defined
below) of each fiscal year of the Corporation (each such date being hereinafter
referred to as a "Dividend Date") following the original date of issuance of any
-------------
share of Series A Preferred Stock (the "Issue Date"). Each Dividend will be
----------
payable to holders of record of Series A Preferred Stock as they appear on the
stock records of the Corporation at the close of business on such record dates,
not more than 60 days prior to such Dividend Dates, as shall be fixed by the
board of directors.
(b) Distribution of Partial Dividend Payments. Except as
-----------------------------------------
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series A Preferred
Stock, such payment shall be distributed ratably among the holders thereof based
upon the aggregate accrued but unpaid dividends on the Series A Preferred Stock
held by each such holder.
(c) Priority of Dividends. The Stock Dividends on the Series A
---------------------
Preferred Stock pursuant to clause (ii)(a) shall be cumulative such that all
accrued and unpaid dividends thereon (through the most recent Dividend Date)
shall be fully paid or declared with funds irrevocably set apart for payment
thereof before any dividend, distribution or payment may be made with respect to
the Common Stock or any other equity securities of the Corporation ranking
junior to the Series A Preferred Stock with respect to the payment of dividends.
(iii) Liquidation. Upon any liquidation, dissolution or winding up
-----------
of the Corporation, whether voluntary or involuntary, the holders of the Series
A Preferred Stock shall be entitled to be paid, before any distribution or
payment is made upon any Common Stock or any other equity securities of the
Corporation ranking junior to the Series A Preferred Stock with respect to
payment of amounts upon liquidation, dissolution or winding up, an amount per
share
3
<PAGE>
equal to the Liquidation Value thereof (plus an amount equal to all accrued and
unpaid dividends thereon to but excluding the date of distribution), and the
holders of Series A Preferred Stock shall not be entitled to any further
payment. If upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets (or proceeds thereof) to be distributed
among the holders of the Series A Preferred Stock are insufficient to permit
payment to such holders of the aggregate amount which they are entitled to be
paid hereunder, then the entire assets (or proceeds thereof) to be distributed
to the holders of Series A Preferred Stock shall be distributed ratably among
such holders of Series A Preferred Stock. Neither a consolidation or merger of
the Corporation with another entity, nor the consummation of a statutory binding
share exchange involving the Corporation, nor the sale or transfer by the
Corporation of all or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, within the meaning of this clause (iii).
(iv) Redemption. (a) Mandatory Redemption. The Corporation shall
---------- --------------------
redeem each of the shares of Series A Preferred Stock held by a holder of Series
A Preferred Stock on the tenth anniversary of the Issue Date (or, if such day is
not any day other than a Saturday, a Sunday or any day on which banks are
authorized or required to close in New York City ("Business Day"), on the next
------------
following Business Day) of such Share (the "Redemption Date"). Upon such
---------------
redemption, each holder of such Share shall be entitled to a cash payment equal
to the current Liquidation Value of such Share plus any accrued dividends to the
date of redemption (the "Redemption Price").
----------------
(b) Effect of Redemption. On or after the Redemption Date, all
--------------------
rights in respect of the Shares to be redeemed, except the right to receive the
Redemption Price, shall (unless default shall be made by the Corporation in the
payment of the Redemption Price, in which event such rights shall be exercisable
until such default is cured) cease and terminate, and such shares shall no
longer be deemed to be outstanding, notwithstanding that any certificates
representing such shares shall not have been surrendered to the Corporation.
(c) Redemption Price. For each share which is to be redeemed,
----------------
the Corporation will be obligated on the Redemption Date to pay to the holder
thereof (upon surrender by such holder at the Corporation's principal office of
the certificate representing such share) an amount in immediately available
funds equal to the Redemption Price thereof. If for any reason the Corporation
defaults in its obligation to pay all or any portion of the Redemption Price, in
addition to any other rights or remedies of the redeeming holder of the Series A
Preferred Stock, the unpaid portion thereof will bear interest at a rate per
annum of 7.5%. If the Corporation's funds which are legally available for
redemption of shares are insufficient to redeem the total number of shares to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of shares ratably among the holders of the
shares to be redeemed based upon the aggregate Redemption Price of such shares
held be each such holder. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obligated to redeem on any Redemption Date but which it has not
redeemed.
4
<PAGE>
(v) Voting Rights. The holders of the Series A Preferred Stock
-------------
shall have no voting rights other than as required by law.
(vi) Transferability. A holder of shares of Series A Preferred Stock
---------------
shall not make, nor suffer to be made, any transfer, sale, assignment, gift,
pledge, mortgage, or other disposition or encumbrance (all which are comprised
within the word "transfer" as used hereinafter) of all or any portion of the
Series A Preferred Stock held by such holder, except as expressly approved by
the Board of Directors or as otherwise contemplated in this designations. Any
transfers which are not in compliance with the terms of this designation, shall
be null and void and the Corporation shall not, and shall cause any transfer
agent not to, give any effect in the Corporation's records to such attempted
transfer.
(vii) Amendments. The rights, privileges and preferences of the
----------
Series A Preferred Stock shall not be amended without the consent of a majority
of the then outstanding shares of the Series A Preferred Stock, given in writing
or by vote at a meeting, if such amendment would have a material and adverse
effect on the rights of the holders of the Series A Preferred Stock.
(viii) Business Day. If any day specified as a Dividend Date is not a
------------
Business Day, such Dividend Date shall be the next following Business Day,
unless such Dividend Date falls in the following calendar month in which case
such Dividend Date shall be the immediately preceding Business Day.
(ix) No Preemptive Rights. The holders of shares of Series A
--------------------
Preferred Stock shall have no preemptive rights.
(x) Rank. The Series A Preferred Stock shall, with respect to
----
dividend rights and rights on liquidation, winding up and dissolution (with
respect to the Liquidation Amount) (i) rank senior and prior to any class of
common stock, and to any other class or series of securities now or hereafter
issued by the Corporation not designated as senior to or on parity with the
Series A Preferred Stock (ii) rank on a parity with any other class or series of
preferred stock hereafter issued by the Corporation, designated as on a parity
as to dividend rights, rights on liquidation, winding up and dissolution (with
respect to the Liquidation Amount) with the Series A Preferred Stock and (iii)
rank junior to any preferred stock hereafter issued by the Corporation,
designated as senior as to dividend rights, rights on liquidation, winding up
and dissolution with the Series A Preferred Stock.
(xi) Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock of the Corporation and may be reissued as part of
another series of Preferred Stock of the Corporation.
5
<PAGE>
6. Limitation on Directors' Liability.
----------------------------------
(a) A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability for (i) any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, or (iii) unlawful distributions under Section 48-18-304 of the Act, as
amended from time to time.
(b) If the Act is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Act, as so amended. Any repeal or modification of the
foregoing by the shareholders shall not adversely affect any right or protection
of a director of the Corporation existing at the time of such repeal or
modification.
7. Indemnification.
---------------
(a) The Corporation shall indemnify, and upon request shall advance
expenses to, in the manner and to the full extent permitted by law, any officer
or director (or the estate of any such person) who was or is a party to, or is
threatened to be made a party to, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee or employee of another
corporation, partnership, joint venture, trust or other enterprise (an
"indemnitee"). The Corporation may, to the full extent permitted by law,
----------
purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against him or her. To the full extent
permitted by law, the indemnification and advances provided for herein shall
include expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement. The indemnification provided herein shall not be deemed to limit
the right of the Corporation to indemnify any other person for any such expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement to
the full extent permitted by law, both as to action in his official capacity and
as to action in another capacity while holding such office. Notwithstanding the
foregoing, the Corporation shall not indemnify any such indemnitee (1) in any
proceeding by the Corporation against such indemnitee; or (2) if a judgment or
other final adjudication adverse to the indemnitee establishes his liability for
(i) any breach of the duty of loyalty to the Corporation or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, or (iii) unlawful distributions under Section 48-
18-304 of the Act.
(b) The rights to indemnification and advancement of expenses set
forth in paragraph 7(a) above are intended to be greater than those which are
otherwise provided for in the Act, are contractual between the Corporation and
the person being indemnified, his heirs, executors and administrators, and, with
respect to paragraph 7(a), are mandatory, notwithstanding a person's failure to
meet the standard of conduct required for permissive indemnification under the
Act, as amended from time to time. The rights to indemnification and
6
<PAGE>
advancement of expenses set forth in paragraph 7(a) above are nonexclusive of
other similar rights which may be granted by law, this Charter, the bylaws, a
resolution of the board of directors or shareholders of the Corporation, or an
agreement with the Corporation, which means of indemnification and advancement
of expenses are hereby specifically authorized.
(c) Any repeal or modification of the provisions of this paragraph
7, either directly or by the adoption of an inconsistent provision of this
Charter, shall not adversely affect any right or protection set forth herein
existing in favor of a particular individual at the time of such repeal or
modification. In addition, if an amendment to the Act limits or restricts in
any way the indemnification rights permitted by law as of the date hereof, such
amendment shall apply only to the extent mandated by law and only to activities
of persons subject to indemnification under this paragraph 7 which occur
subsequent to the effective date of such amendment.
8. Express Powers of Board of Directors. In furtherance of and not
------------------------------------
in limitation of the powers conferred by statute, the Corporation is expressly
authorized, acting upon the authority of the board of directors and without the
approval of the shareholders, to:
(a) Issue shares of any class or series as a share dividend in
respect of shares of the same class or series or any other class or series;
(b) Fix or change the number of directors, including an increase or
decrease in the number of directors;
(c) Determine, establish or modify, in whole or in part, the
preferences, limitations and relative rights of (i) any class of shares before
the issuance of any shares of that class, or (ii) one or more series within a
class before the issuance of any shares of that series. The board of directors
is further authorized to amend this Charter, without shareholder action, to set
forth such preferences, limitations and relative rights; and
(d) Determine, in accordance with law, the method by which vacancies
occurring on the board of directors are to be filled.
9. Removal of Directors. Directors may be removed from office either
--------------------
with or without cause at any time by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote, given at
a meeting of the shareholders called for that purpose, or by the consent of the
holders of a majority of the outstanding shares of the Corporation entitled to
vote, give in accordance with Section 48-17-104 of the Act.
This Charter was duly adopted on May 28, 1999 by the board of
directors and shareholders of the Corporation.
7
<PAGE>
IN WITNESS WHEREOF, PACER INTERNATIONAL, INC. has caused this Amended
and Restated Charter to be signed by Donald C. Orris, its Chief Executive
Officer, who hereby acknowledges under penalties of perjury that the facts
herein stated are true and that this Amended and Restated Charter is his act and
deed, this 28th day of May, 1999.
PACER INTERNATIONAL, INC.
/s/ Donald C. Orris
--------------------------------------
Donald C. Orris
Chief Executive Officer
Dated: May 28, 1999
8
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
PACER INTERNATIONAL, INC.
ARTICLE I
CORPORATE OFFICES
The registered office of the Corporation within the State of Tennessee
shall be located at CT Corporation, 530 Gay Street, Knoxville, TN, 37902. The
Corporation may also have such other offices, including its principal office, at
such places, within or without the State of Tennessee, as the board of directors
may from time to time designate or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS' MEETING
Section 1. Annual Meetings. The annual meeting of shareholders shall
---------------
be held on such other date during the year and at such other time as may be
designated by the board of directors and stated in the notice of meeting, for
the purpose of electing directors and transacting such other business as may be
properly brought before the meeting.
Section 2. Special Meetings. Special meetings of shareholders may be
----------------
called for any purpose or purposes by the board of directors.
Section 3. Notice of Meetings. A written notice of each meeting of
------------------
shareholders stating the place, date and time of the meeting, and, in the case
of a special meeting, describing the purpose or purposes for which the meeting
is called, shall be given to each shareholder entitled to notice of such meeting
not less than ten days nor more than two months before the date of the meeting.
Section 4. Place of Meetings. Meetings of shareholders shall be held
-----------------
at such places, within or without the State of Tennessee, as may be designated
by the board of directors and stated in the notice of meeting.
Section 5. Quorum. The holders of shares entitled to vote as a
------
separate voting group may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Unless the charter or the Act provides
otherwise, the holders of a majority of the votes entitled to be cast on a
matter by a voting group constitute a quorum of that voting group for action on
that matter. Once a share is represented for any purpose at a meeting, the
holder is deemed present for quorum purposes for the remainder of the meeting
and for any adjournment of that meeting, unless a new record date is or must be
set for that adjourned meeting.
Section 6. Voting. Directors shall be elected by a plurality of the
------
votes cast by shareholders entitled to vote in the election at a meeting at
which a quorum is present. Shareholder action on any other matter is approved by
a voting group, if the votes cast by shareholders within the voting group in
favor of the action exceed the votes cast by shareholders within the voting
group in opposition to such action, unless the charter or the Act provides
<PAGE>
otherwise. If two or more groups are entitled to vote separately on a matter,
action on the matter is approved only when approved by each voting group.
Section 7. Adjournment. If a meeting of shareholders is adjourned to
-----------
another date, time or place, notice need not be given of the adjourned meeting
if the new date, time and place are announced at the meeting before the
adjournment. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the time originally designated for the
meeting if a quorum existed at the time originally designated for the meeting;
provided, however, if a new record date is or must be fixed under the Act or
these bylaws, a notice of the adjourned meeting must be given to shareholders as
of the new record date.
Section 8. Proxies. A shareholder may appoint a proxy to vote at a
-------
meeting of shareholders or otherwise act for him by signing an appointment form,
either personally or by his attorney-in-fact. An appointment of a proxy is
effective when received by the secretary or other officer or agent authorized to
tabulate votes. An appointment is valid for eleven months, unless another period
is expressly provided for in the appointment form. An appointment of a proxy is
revocable by the shareholder, unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest.
Section 9. Action by Written Consent. Any action required or
-------------------------
permitted to be taken at a meeting of the shareholders may be taken without a
meeting, if all shareholders consent to the taking of such action without a
meeting by signing one or more written consents describing the action taken and
indicating each shareholder's vote or abstention on the action. The affirmative
vote of the number of shares which would be necessary to authorize or take
action at a meeting of shareholders is the act of the shareholders without a
meeting. The written consent or consents shall be included in the minutes or
filed with the corporate records reflecting the action taken. Action taken by
written consent is effective when the last shareholder signs the consent, unless
the consent specifies a different effective date.
ARTICLE III
RECORD DATE
In order that the Corporation may determine the shareholders entitled
to notice of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the board of directors may fix, in advance, a record date, which shall not be
more than seventy nor less than ten days before the date of such meeting, nor
more than seventy days prior to any other action. If no record date is fixed,
(i) the record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
before the day on which the first notice is given to such shareholders and (ii)
the record date for determining shareholders for any other purpose shall be at
the close of business on the day that the board of directors authorizes the
action. A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting,
unless the board of directors fixes a new record date. The board of directors
must fix a new record date, if the meeting is adjourned to a date more than four
months after the date fixed for the original meeting.
2
<PAGE>
ARTICLE IV
DIRECTORS
Section 1. Number and Term. The business and affairs of the
---------------
Corporation shall be managed under the direction of a board of directors
consisting of not less than five nor more than nine members, the number of which
shall be fixed by the board of directors. Each director shall hold office until
the next annual meeting of shareholders and until his successor is elected and
qualified or until his earlier resignation or removal. A decrease in the number
of directors shall not shorten an incumbent director's term.
Section 2. Committees. The board of directors, with the approval of a
----------
majority of all the directors in office when the action is taken, may create one
or more committees. A committee shall consist of one or more directors who serve
at the pleasure of the board of directors. Any such committee, to the extent
specified by the board of directors, may exercise the authority of the board of
directors in supervising the management of the business and affairs of the
Corporation, except that a Committee may not: (i) authorize distributions,
except according to a formula or method prescribed by the board of directors;
(ii) approve or propose to shareholders action required by law to be approved by
shareholders; (iii) fill vacancies on the board of directors or any of its
committees; (iv) amend the charter; (v) adopt, amend or repeal bylaws; (vi)
approve a plan of merger not requiring shareholder approval; (vii) authorize or
approve reacquisition of shares, except according to a formula or method
prescribed by the board of directors; or (vii) authorize or approve the issuance
or sale or contract for sale of shares, or determine the designation and
relative rights, preferences and limitations of a class or series of shares,
except that the board of directors may authorize a committee or senior executive
officer of the Corporation to do so within limits specifically prescribed by the
board of directors. The provisions of Sections 7, 8, 9, 10, 11 and 12 of this
Article IV and of Article V applicable to the board of directors shall also
apply to committees.
Section 3. Compensation. Directors shall receive such compensation as
------------
shall be fixed by the board of directors and shall be entitled to reimbursement
for any reasonable expenses incurred in attending meetings and otherwise
carrying out their duties. Directors may also serve the Corporation in any other
capacity and receive compensation therefor.
Section 4. Removal. Shareholders may remove one or more directors
-------
with or without cause. If a director is elected by a voting group of
shareholders, only shareholders of that voting group may participate in the vote
to remove him without cause. A director may be removed only if the number of
votes cast to remove him exceeds the number of votes cast not to remove him.
Section 5. Resignation. A director may resign at any time by
-----------
delivering written notice to the Corporation, the board of directors, the
chairman or the president. A resignation is effective when the notice is
delivered, unless the notice specifies a later effective date.
Section 6. Vacancies. The board of directors may fill any vacancy
---------
occurring on the board of directors, including any vacancy resulting from an
increase in the number of directors or from the resignation or removal of a
director. If the directors remaining in office constitute fewer than a quorum,
the board of directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office.
3
<PAGE>
Section 7. Quorum and Voting. A quorum of the board of directors
-----------------
consists of a majority of the number of directors fixed by the board of
directors pursuant to Section 1 of this Article IV. If a quorum is present when
a vote is taken, the affirmative vote of a majority of directors present is the
act of the board of directors, unless the charter requires the vote of a greater
number of directors.
Section 8. Regular Meetings. Regular meetings of the board of
----------------
directors may be held without notice at such places, within or without the
States of Tennessee and California, on such dates and at such times as the board
of directors may determine from time to time.
Section 9. Special Meetings. Special meetings of the board of
----------------
directors may be called by the chairman of the board, the president or any two
directors and shall be held at such places, within or without the States of
Tennessee and California, on such dates and at such times as may be stated in
the notice of meeting.
Section 10. Notices. Special meetings of the board of directors must
-------
be preceded by at least one days' notice of the date, time and place of the
meeting. The notice need not describe the purpose of the meeting, unless the
purpose, or one of the purposes, of the meeting is to remove a director or
directors pursuant to Section 4 of this Article IV. Notice of an adjourned
meeting need not be given, if the time and place to which the meeting is
adjourned are fixed at the meeting at which the adjournment is taken and if the
period of any one adjournment does not exceed one month.
Section 11. Meeting by Telephone. Any or all directors may participate
--------------------
in a regular or special meeting by conference telephone or any other means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
Section 12. Action by Written Consent. Any action required or
-------------------------
permitted to be taken at a meeting of the board of directors may be taken
without a meeting, if all directors consent to the taking of such action without
a meeting by signing one or more written consents describing the action taken
and indicating each director's vote or abstention on the action. The affirmative
vote of the number of directors that would be necessary to authorize or take
action at a meeting is the act of the board of directors without a meeting. The
written consent or consents shall be included in the minutes or filed with the
corporate records reflecting the action taken. Action taken by written consent
is effective when the last director signs the consent, unless the consent
specifies a different effective date.
ARTICLE V
WAIVER OF NOTICE
A shareholder or director may waive any notice required to be given by
the Act, the charter or these bylaws before or after the date and time stated in
the notice. The waiver must be in writing, signed by the shareholder or
director entitled to the notice and delivered to the Corporation and filed in
the Corporation's minutes or corporate records, except that a shareholder's or
director's attendance at or participation in a meeting may constitute a waiver
of notice under the Act. Neither the business to be transacted at, nor the
purpose of, any meeting of the shareholders or directors need be specified in
any waiver of notice.
4
<PAGE>
ARTICLE VI
OFFICERS
Section 1. Election and Term. At the first meeting of the board of
-----------------
directors following the annual meeting of shareholders, or as soon thereafter as
is conveniently possible, the board of directors shall elect a president and a
secretary and such other officers as the board of directors may determine,
including a chairman of the board, a vice chairman of the board, one or more
vice presidents (any one or more of which may be designated as a senior or
executive vice president), a treasurer, a controller and one or more assistant
vice presidents, assistant treasurers, assistant controllers and assistant
secretaries. The board of directors may elect officers at such additional times
as it deems advisable. Each officer of the Corporation shall serve until his
successor is elected and qualified or until his earlier resignation or removal.
Any number of offices may be held by the same person, except that the president
may not serve as the secretary.
Section 2. Compensation. The salaries and other compensation of the
------------
officers of the Corporation shall be determined by the board of directors or a
committee thereof.
Section 3. Removal. The board of directors may remove any officer at
-------
any time, with or without cause, but no such removal shall affect the contract
rights, if any, of the person so removed.
Section 4. Resignation. An officer of the Corporation may resign at
-----------
any time by delivering notice to the Corporation. A resignation is effective
when the notice is delivered, unless the notice specifies a later effective
date. If a resignation is made effective at a later date and the Corporation
accepts the future effective date, the board of directors may fill the pending
vacancy before the effective date if it provides that the successor does not
take office until the effective date. An officer's resignation does not affect
the Corporation's contract rights, if any, with the officer.
Section 5. Duties. The duties and powers of the officers of the
------
corporation shall be as follows:
(a) Chief Executive Officer - The chief executive officer shall (i)
be chosen from among the members of the board of directors (ii) be primarily
responsible for the general management of the business affairs of the
Corporation and for implementing the policies and directives of the board of
directors, (iii) preside at all meetings of shareholders and the board of
directors, (iv) have authority to make contracts on behalf of the Corporation in
the ordinary course of the corporation's business and (v) perform such other
duties as from time to time may be assigned by the board of directors or any
committee therof.
(b) President - The president shall (i) preside at all meetings of
the shareholders and the board of directors during the absence or disability of
the chairman of the board, (ii) be primarily responsible for the general
management of the business of the Corporation and for implementing the policies
and directives of the board of directors during the absence or disability of the
chairman of the board, (iii) have authority to make contracts on behalf of the
Corporation in the ordinary course of the Corporation's business and (iv)
perform such other duties as from time to time may be assigned by the chairman
of the board or the board of directors or any committee thereof.
5
<PAGE>
(c) Vice Presidents - The vice presidents in the order designated by
the board of directors, shall exercise the functions of the president during the
absence or disability of the president and shall perform such other duties as
may be assigned by the chairman of the board, the president or the board of
directors or any committee thereof.
(d) Chief Financial Officer - The chief financial officer shall (i)
have general supervision over the funds of the Corporation and the investment or
deposit thereof, (ii) advise the officers and, if requested, the board of
directors regarding the financial condition of the Corporation and (iii) perform
such other duties as may be assigned by the chairman of the board or the board
of directors or any committee thereof.
(e) Secretary - The secretary shall (i) attend the meetings of the
shareholders, the board of directors and committees of the board of directors
and prepare minutes of all such meetings in a book to be kept for that purpose,
(ii) give, or cause to be given, such notice as may be required of all meetings
of the shareholders, board of directors and committees of the board of
directors, (iii) authenticate records of the Corporation and (iv) perform such
other duties as may be assigned by the chairman of the board or the board of
directors or any committee thereof.
ARTICLE VII
DIRECTOR INDEMNIFICATION
To the maximum extent permitted by law, subject to the limitations
contained in this Article VIII, the Corporation shall indemnify an individual
who is a party to a proceeding because such individual is or was an officer of
the Corporation against any liability incurred in the proceeding and, prior to
the disposition thereof, advance the reasonable expenses incurred by such
officer in connection with the proceeding, except that the Corporation shall not
be required to indemnify or advance expenses to any officer, (i) if it is
determined that the officer did not conduct himself in good faith and in the
reasonable belief that his conduct was not opposed to the Corporation's best
interests and, in the case of a criminal proceeding, had no reasonable cause to
believe his conduct was unlawful, (ii) if it is determined that the officer is
liable for profits made from the purchase or sale by the officer of securities
of the Corporation pursuant to the provisions of Section 16(b) of the Securities
and Exchange Act of 1934, as amended, or any similar provisions of any federal
or state statutes or regulations or (iii) in connection with a proceeding
initiated by or on behalf of such officer or to which such officer voluntarily
becomes a party, other than a suit to enforce indemnification rights. No
indemnification shall be made by the Company for any amount paid in settlement
without the Corporation's prior written consent. Conduct with respect to an
employee benefit plan for a purpose reasonably believed to be in the interest of
the participants in and beneficiaries of the plan is conduct that is not opposed
to the Corporation's best interests. The termination of a proceeding by a
judgment, order, settlement, conviction or upon a pleas of nolo contendere or
its equivalent is not, of itself, determinative whether the conduct in question
was opposed to the Corporation's best interests. The determination on behalf of
the Company of whether an officer is entitled to indemnification or advancement
of expenses under this Article VIII shall be made by the board of directors or a
committee thereof or by independent special legal counsel in accordance with the
provisions of Section 48-18-506 of the Act relating to indemnification of
directors. An officer's rights to advancement of expenses are also conditioned
upon the officer's furnishing the Corporation: (a) a written affirmation,
personally signed by or on behalf of the officer, of his good faith belief that
6
<PAGE>
he is or will be entitled to indemnification for liability under the terms of
this Article XIV and (b) a written undertaking (in the form of an unlimited
general obligation of the officer, which need not be secured) personally signed
by or on behalf of the officer to repay any advances, if a judgment or other
final adjudication adverse to the officer establishes his liability contrary to
his affirmation. An officer's rights to indemnification and advancement of
expenses as provided in this Article VIII are intended to be greater than those
which are otherwise provided for in the Act notwithstanding a failure to meet
the standard of conduct required for permissive indemnification under the Act,
are contractual in nature between the Corporation and the officer and are
mandatory. An officer's rights to indemnification and advancement of expenses
under this bylaw shall not be exclusive of other rights to which an officer may
be entitled under an insurance policy, the Act, the charter, a resolution of
shareholders or directors or an agreement providing for indemnification.
ARTICLE VIII
EMERGENCY BYLAW
In the event that a quorum of directors cannot be readily assembled
because of a catastrophic event, the board of directors may take action by the
affirmative vote of a majority of those directors present at a meeting and may
exercise any emergency power granted to a board of directors under the act not
inconsistent with this bylaw. If less than three regularly elected directors
are present, the director present having the greatest seniority as a director
may appoint one or more persons (not to exceed the number most recently fixed by
the board pursuant to Section 1 of Article IV) from among the officers or other
executive employees of the Corporation to serve as substitute directors. If no
regularly elected director is present, the officer present having the greatest
seniority as an officer shall serve as a substitute director, shall appoint up
to four additional persons from among the officers or other executive employees
of the Corporation to serve as substitute directors. Special meetings of the
board of directors may be called in an emergency by the director or, if no
director is present at the Corporation's principal offices, by the officer
present having the greatest seniority as an officer.
ARTICLE IX
CORPORATE SEAL
The Corporation may have a corporate seal, but the use of or failure
to use any such seal shall not have any legal effect on any action taken or
instrument executed by or on behalf of the Corporation. The seal may be used by
impressing or affixing it to an instrument or by causing a facsimile thereof to
be printed or otherwise reproduced thereon.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall begin the 1st business day of
January each year.
7
<PAGE>
ARTICLE XI
AMENDMENT
The board of directors may amend or repeal these bylaws, unless (i)
the charter or the Act reserves this power exclusively to shareholders of (ii)
the shareholders, in amending or repealing a particular bylaw, provide expressly
that the board of directors may not amend or repeal that bylaw. Shareholders
may amend or repeal any bylaw, even though the bylaws may also be amended or
repealed by the board of directors.
ARTICLE XII
DEFINITION
The term "Act" as used in these bylaws refers to the Tennessee
Business Corporation Act, as amended from time to time. Terms defined in the
Act shall have the same meanings when used in these bylaws.
8
<PAGE>
EXHIBIT 4.1
________________________________________________________________________________
CREDIT AGREEMENT
among
PACER INTERNATIONAL, INC.
(f/k/a Land Transport Services, Inc.)
VARIOUS LENDING INSTITUTIONS,
CREDIT SUISSE FIRST BOSTON,
AS DOCUMENTATION AGENT,
MORGAN STANLEY SENIOR FUNDING, INC.,
AS SYNDICATION AGENT,
and
BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT
________________________________________________________________________________
Dated as of May 28, 1999
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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SECTION 1. Amount and Terms of Credit................................................................ 1
1.01 Commitments............................................................................... 1
1.02 Minimum Borrowing Amounts, etc............................................................ 4
1.03 Notice of Borrowing....................................................................... 4
1.04 Disbursement of Funds..................................................................... 5
1.05 Notes..................................................................................... 6
1.06 Conversions............................................................................... 8
1.07 Pro Rata Borrowings....................................................................... 8
1.08 Interest.................................................................................. 9
1.09 Interest Periods.......................................................................... 10
1.10 Increased Costs; Illegality; etc.......................................................... 11
1.11 Compensation.............................................................................. 13
1.12 Change of Lending Office.................................................................. 13
1.13 Replacement of Banks...................................................................... 14
SECTION 2. Letters of Credit......................................................................... 16
2.01 Letters of Credit......................................................................... 16
2.02 Letter of Credit Requests................................................................. 18
2.03 Letter of Credit Participations........................................................... 18
2.04 Agreement to Repay Letter of Credit Drawings.............................................. 20
2.05 Increased Costs........................................................................... 21
SECTION 3. Fees; Commitments......................................................................... 22
3.01 Fees...................................................................................... 22
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving Loan Commitment.......... 23
3.03 Mandatory Reduction of Commitments........................................................ 24
SECTION 4. Payments.................................................................................. 25
4.01 Voluntary Prepayments..................................................................... 25
4.02 Mandatory Repayments and Commitment Reductions............................................ 26
4.03 Method and Place of Payment............................................................... 32
4.04 Net Payments.............................................................................. 33
SECTION 5. Conditions Precedent to Initial Credit Events............................................. 35
5.01 Execution of Agreement; Notes............................................................. 36
5.02 Officer's Certificate..................................................................... 36
</TABLE>
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5.03 Opinions of Counsel................................................................................ 36
5.04 Company Documents; Proceedings..................................................................... 36
5.05 Adverse Change, etc................................................................................ 37
5.06 Litigation......................................................................................... 37
5.07 Approvals.......................................................................................... 37
5.08 Consummation of the Recapitalization; Equity Financing, etc........................................ 38
5.09 Refinancing........................................................................................ 39
5.10 Security Documents; etc............................................................................ 40
5.11 Subsidiaries Guaranty.............................................................................. 41
5.12 Employee Benefit Plans; Shareholders' Agreements; Management
Agreements; Employment Agreements; Collective Bargaining
Agreements; Existing Indebtedness Agreements; Material Contracts; Tax
Allocation Agreements.......................................................................... 41
5.13 Consent Letter..................................................................................... 42
5.14 Solvency Certificate; Insurance Certificates....................................................... 43
5.15. Financial Statements; Projections.................................................................. 43
5.16 Payment of Fees.................................................................................... 43
SECTION 6. Conditions Precedent to All Credit Events......................................................... 43
6.01 No Default; Representations and Warranties......................................................... 44
6.02 Notice of Borrowing; Letter of Credit Request...................................................... 44
SECTION 7. Representations and Warranties.................................................................... 44
7.01 Company Status..................................................................................... 45
7.02 Company Power and Authority........................................................................ 45
7.03 No Violation....................................................................................... 45
7.04 Litigation......................................................................................... 45
7.05 Use of Proceeds; Margin Regulations................................................................ 46
7.06 Governmental Approvals............................................................................. 46
7.07 Investment Company Act............................................................................. 46
7.08 Public Utility Holding Company Act................................................................. 46
7.09 True and Complete Disclosure....................................................................... 46
7.10 Financial Condition; Financial Statements.......................................................... 47
7.11 Security Interests................................................................................. 49
7.12 Compliance with ERISA.............................................................................. 49
7.13 Capitalization..................................................................................... 50
7.14 Subsidiaries....................................................................................... 51
7.15 Intellectual Property, etc......................................................................... 51
7.16 Compliance with Statutes, etc...................................................................... 51
7.17 Environmental Matters.............................................................................. 51
7.18 Properties......................................................................................... 52
7.19 Labor Relations.................................................................................... 52
7.20 Tax Returns and Payments........................................................................... 53
7.21 Existing Indebtedness.............................................................................. 53
</TABLE>
(ii)
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7.22 Insurance............................................................................................... 53
7.23 Representations and Warranties in Other Documents....................................................... 53
7.24 The Transaction......................................................................................... 54
7.25 Special Purpose Corporation............................................................................. 54
7.26 Subordination........................................................................................... 54
7.27 Year 2000 Representation................................................................................ 54
SECTION 8. Affirmative Covenants.................................................................................. 55
8.01 Information Covenants................................................................................... 55
8.02 Books, Records and Inspections.......................................................................... 59
8.03 Insurance............................................................................................... 59
8.04 Payment of Taxes........................................................................................ 60
8.05 Corporate Franchises.................................................................................... 60
8.06 Compliance with Statutes; etc........................................................................... 61
8.07 Compliance with Environmental Laws...................................................................... 61
8.08 ERISA................................................................................................... 62
8.09 Good Repair............................................................................................. 63
8.10 End of Fiscal Years; Fiscal Quarters.................................................................... 63
8.11 Additional Security; Further Assurances................................................................. 64
8.12 Foreign Subsidiaries Security........................................................................... 65
8.13 Use of Proceeds......................................................................................... 66
8.14 Permitted Acquisitions.................................................................................. 66
8.15 Performance of Obligations.............................................................................. 68
8.16 Maintenance of Company Separateness..................................................................... 68
8.17 Year 2000 Compliance.................................................................................... 68
SECTION 9. Negative Covenants..................................................................................... 69
9.01 Changes in Business..................................................................................... 69
9.02 Consolidation; Merger; Sale or Purchase of Assets; etc.................................................. 69
9.03 Liens................................................................................................... 72
9.04 Indebtedness............................................................................................ 74
9.05 Advances; Investments; Loans............................................................................ 77
9.06 Dividends; etc.......................................................................................... 79
9.07 Transactions with Affiliates and Unrestricted Subsidiaries.............................................. 81
9.08 Designated Senior Debt.................................................................................. 82
9.09 Consolidated Interest Coverage Ratio.................................................................... 82
9.10 Adjusted Total Leverage Ratio........................................................................... 83
9.11 Capital Expenditures.................................................................................... 84
9.12 Limitation on Voluntary Payments and Modifications of Indebtedness;
Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements;
Issuances of Capital Stock; etc..................................................................... 83
9.13 Limitation on Issuance of Capital Stock................................................................. 87
9.14 Limitation on Certain Restrictions on Subsidiaries...................................................... 88
</TABLE>
(iii)
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9.15 Limitation on the Creation of Subsidiaries, Joint Ventures and Unrestricted Subsidiaries.................. 89
SECTION 10. Events of Default......................................................................................... 90
10.01 Payments.................................................................................................. 90
10.02 Representations, etc...................................................................................... 90
10.03 Covenants................................................................................................. 90
10.04 Default Under Other Agreements............................................................................ 90
10.05 Bankruptcy, etc........................................................................................... 91
10.06 ERISA..................................................................................................... 91
10.07 Security Documents........................................................................................ 92
10.08 Guaranties................................................................................................ 92
10.09 Judgments................................................................................................. 92
10.10 Ownership................................................................................................. 92
SECTION 11. Definitions............................................................................................... 93
SECTION 12. The Agents................................................................................................ 130
12.01 Appointment............................................................................................... 130
12.02 Delegation of Duties...................................................................................... 130
12.03 Exculpatory Provisions.................................................................................... 131
12.04 Reliance by Agents........................................................................................ 131
12.05 Notice of Default......................................................................................... 132
12.06 Nonreliance on Agents and Other Banks..................................................................... 132
12.07 Indemnification........................................................................................... 133
12.08 Agents in their Individual Capacities..................................................................... 133
12.09 Holders................................................................................................... 134
12.10 Resignation of the Agents................................................................................. 134
SECTION 13. Miscellaneous............................................................................................. 135
13.01 Payment of Expenses, etc.................................................................................. 135
13.02 Right of Setoff........................................................................................... 136
13.03 Notices................................................................................................... 136
13.04 Benefit of Agreement...................................................................................... 136
13.05 No Waiver; Remedies Cumulative............................................................................ 139
13.06 Payments Pro Rata......................................................................................... 139
13.07 Calculations; Computations................................................................................ 139
13.08 Governing Law; Submission to Jurisdiction; Venue.......................................................... 140
13.09 Counterparts.............................................................................................. 141
13.10 Effectiveness............................................................................................. 141
13.11 Headings Descriptive...................................................................................... 141
13.12 Amendment or Waiver; etc.................................................................................. 141
13.13 Survival.................................................................................................. 143
13.14 Domicile of Loans and Commitments......................................................................... 143
</TABLE>
(iv)
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13.15 Confidentiality................................................................................................. 143
13.16 Waiver of Jury Trial............................................................................................ 140
13.17 Register........................................................................................................ 140
13.18 Limitation on Additional Amounts, etc........................................................................... 141
13.19 Post-Closing Actions............................................................................................ 141
</TABLE>
SCHEDULE I List of Banks and Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Real Properties
SCHEDULE IV Existing Indebtedness
SCHEDULE V Plans
SCHEDULE VI Existing Investments
SCHEDULE VII Subsidiaries
SCHEDULE VIII Insurance
SCHEDULE IX Existing Liens
SCHEDULE X Capitalization
SCHEDULE XI Consolidated EBITDA Adjustments
SCHEDULE XII Environmental Matters
SCHEDULE XIII Tractor Trailers
SCHEDULE XIV Existing Letters of Credit
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-2 Form of Revolving Note
EXHIBIT B-3 Form of Swingline Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 Form of Opinion of Dewey Ballantine LLP, special New York counsel
to the Credit Parties
EXHIBIT E-2 Form of Opinion of Waller Lansden Dortch & Davis, special
Tennessee counsel to the Credit Parties
EXHIBIT F Form of Officers' Certificate
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Security Agreement
EXHIBIT I Form of Subsidiaries Guaranty
EXHIBIT J Form of Consent Letter
EXHIBIT K Form of Solvency Certificate
EXHIBIT L Form of Assignment and Assumption Agreement
EXHIBIT M Form of Intercompany Note
EXHIBIT N Form of Shareholder Subordinated Note
EXHIBIT O Form of Borrower Exchange PIK Preferred Stock Certificate of
Designation
(v)
<PAGE>
CREDIT AGREEMENT, dated as of May 28, 1999, among PACER INTERNATIONAL,
INC. (f/k/a Land Transport Services, Inc.), a Tennessee corporation (the
"Borrower"), the lenders from time to time party hereto (each, a "Bank" and,
collectively, the "Banks"), CREDIT SUISSE FIRST BOSTON, as Documentation Agent
(in such capacity, the "Documentation Agent"), MORGAN STANLEY SENIOR FUNDING,
INC., as Syndication Agent (in such capacity, the "Syndication Agent"), and
BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the
"Administrative Agent" and, together with the Documentation Agent and the
Syndication Agent, each, an "Agent" and, collectively, the "Agents"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 11 are used herein as so defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.01 Commitments. (a) Subject to and upon the terms and conditions
-----------
set forth herein, each Bank with a Term Loan Commitment severally agrees to make
a term loan (each, a "Term Loan" and, collectively, the "Term Loans") to the
Borrower, which Term Loans:
(i) shall be incurred by the Borrower pursuant to a single drawing
on the Initial Borrowing Date for the purposes described in Section
7.05(a);
(ii) shall be denominated in U.S. Dollars;
(iii) except as hereafter provided, shall, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Loans, provided, that (x) except as otherwise
--------
specifically provided in Section 1.10(b), all Term Loans made as part of
the same Borrowing shall at all times consist of Term Loans of the same
Type and (y) unless the Administrative Agent has determined that the
Syndication Date has occurred (at which time this clause (y) shall no
longer be applicable), no more than three Borrowings of Term Loans to be
maintained as Eurodollar Loans may be incurred prior to the 90/th/ day
after the Initial Borrowing Date (or, if later, the last day of the
Interest Period applicable to the third Borrowing of Eurodollar Loans
referred to below), each of which Borrowings of Eurodollar Loans may only
have an Interest Period of one month, and the first of which Borrowings may
only be made on, or within five Business Days after, the Initial Borrowing
Date, the second of which Borrowings may only be made on the last day of
the Interest Period of the first such Borrowing and the
<PAGE>
third of which Borrowings may only be made on the last day of the Interest
Period of the second such Borrowing; and
(iv) shall be made by each Bank in that initial aggregate principal
amount as is equal to the Term Loan Commitment of such Bank on the Initial
Borrowing Date (before giving effect to the termination thereof on such
date pursuant to Section 3.03(b)).
Once repaid, Term Loans incurred hereunder may not be reborrowed.
(b) Subject to and upon the terms and conditions herein set forth,
each RL Bank severally agrees, at any time and from time to time on and after
the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, to
make a revolving loan or revolving loans (each, a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which Revolving Loans:
(i) shall be denominated in U.S. Dollars;
(ii) shall, at the option of the Borrower, be incurred and maintained
as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided
--------
that (x) except as otherwise specifically provided in Section 1.10(b), all
Revolving Loans made as part of the same Borrowing shall at all times be of
the same Type and (y) unless the Administrative Agent has determined that
the Syndication Date has occurred (at which time this clause (y) shall no
longer be applicable), no more than three Borrowings of Revolving Loans to
be maintained as Eurodollar Loans may be incurred prior to the 90/th/ day
after the Initial Borrowing Date (or, if later, the last day of the
Interest Period applicable to the third Borrowing of Eurodollar Loans
referred to below), each of which Borrowings of Eurodollar Loans may only
have an Interest Period of one month, and the first of which Borrowings may
only be made on the same date as the initial Borrowing of Term Loans that
are maintained as Eurodollar Loans, the second of which Borrowings may only
be made on the last day of the Interest Period of the first such Borrowing
and the third of which Borrowings may only be made on the last day of the
Interest Period of the second such Borrowing;
(iii) may be repaid and reborrowed in accordance with the provisions
hereof;
(iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when added to the product of (x) such
Bank's Adjusted RL Percentage and (y) the sum of (I) the aggregate amount
of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which
are repaid with the proceeds of, and simultaneously with the incurrence of,
the respective incurrence of Revolving Loans) at such time and (II) the
aggregate principal amount of all Swingline Loans (exclusive of Swingline
Loans which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Revolving Loan Commitment of such Bank at such
time; and
<PAGE>
(v) shall not exceed for all Banks at any time outstanding that
aggregate principal amount which, when added to (x) the aggregate amount of
all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) at such time and (y) the
aggregate principal amount of all Swingline Loans (exclusive of Swingline
Loans which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) then
outstanding, exceeds an amount equal to the Total Revolving Loan Commitment
then in effect.
(c) Subject to and upon the terms and conditions set forth herein,
BTCo in its individual capacity agrees to make at any time and from time to time
on and after the Initial Borrowing Date and prior to the Swingline Expiry Date,
a revolving loan or revolving loans to the Borrower (each, a "Swingline Loan"
and, collectively, the "Swingline Loans"), which Swingline Loans:
(i) shall be denominated in U.S. Dollars;
(ii) shall be made and maintained as Base Rate Loans;
(iii) may be repaid and reborrowed in accordance with the provisions
hereof;
(iv) shall not exceed in aggregate principal amount at any time
outstanding, when combined with (x) the aggregate principal amount of all
Revolving Loans made by Non-Defaulting Banks then outstanding and (y) the
aggregate amount of all Letter of Credit Outstandings at such time, an
amount equal to the Adjusted Total Revolving Loan Commitment at such time
(after giving effect to any changes thereto on such date); and
(v) shall not exceed in aggregate principal amount at any time
outstanding the Maximum Swingline Amount.
Notwithstanding anything contained in this Section 1.01(c), (i) BTCo shall not
be obligated to make any Swingline Loans at a time when a Bank Default exists
unless BTCo has entered into arrangements satisfactory to it and the Borrower to
eliminate BTCo's risk with respect to the Defaulting Bank's or Banks'
participation in such Swingline Loans, including by cash collateralizing such
Defaulting Bank's or Banks' RL Percentage of the outstanding Swingline Loans and
(ii) BTCo will not make a Swingline Loan after it has received written notice
from the Borrower or the Required Banks stating that a Default or an Event of
Default exists until such time as BTCo shall have received a written notice of
(x) rescission of such notice from the party or parties originally delivering
the same or (y) a waiver of such Default or Event of Default from the Required
Banks.
(d) On any Business Day, BTCo may, in its sole discretion, give
notice to the RL Banks that its outstanding Swingline Loans shall be funded with
a Borrowing of Revolving Loans (provided that each such notice shall be deemed
--------
to have been automatically given upon the occurrence of a Default or an Event of
Default under Section 10.05 or upon the exercise of any of the remedies provided
in the last paragraph of Section 10), in which case a Borrowing of
<PAGE>
Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all RL
Banks pro rata based on each RL Bank's Adjusted RL Percentage (determined before
--- ----
giving effect to any termination of the Revolving Loan Commitments pursuant to
the last paragraph of Section 10), and the proceeds thereof shall be applied
directly to repay BTCo for such outstanding Swingline Loans. Each RL Bank
hereby irrevocably agrees to make Revolving Loans upon one Business Day's notice
pursuant to each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the date specified in writing by BTCo
notwithstanding (i) that the amount of the Mandatory Borrowing may not comply
with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any
conditions specified in Section 5 or 6 are then satisfied, (iii) whether a
Default or an Event of Default has occurred and is continuing, (iv) the date of
such Mandatory Borrowing and (v) the amount of the Total Revolving Loan
Commitment or the Adjusted Total Revolving Loan Commitment at such time. In the
event that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to the
Borrower), then each RL Bank (other than BTCo) hereby agrees that it shall
forthwith purchase from BTCo (without recourse or warranty) such assignment of
the outstanding Swingline Loans as shall be necessary to cause the RL Banks to
share in such Swingline Loans ratably based upon their respective Adjusted RL
Percentages (determined before giving effect to any termination of the Revolving
Loan Commitments pursuant to the last paragraph of Section 10), provided that
--------
(x) all interest payable on the Swingline Loans shall be for the account of BTCo
until the date the respective assignment is purchased and, to the extent
attributable to the purchased assignment, shall be payable to the RL Bank
purchasing same from and after such date of purchase (or, if earlier, from the
date on which the Mandatory Borrowing would otherwise have occurred, so long as
the payments required by the following clause (y) have in fact been made) and
(y) at the time any purchase of assignments pursuant to this sentence is
actually made, the purchasing RL Bank shall be required to pay BTCo interest on
the principal amount of assignment purchased for each day from and including the
day upon which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such assignment, at the rate otherwise
applicable to Revolving Loans maintained as Base Rate Loans hereunder for each
day thereafter.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount
-------------------------------
of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount
applicable to such Loans, provided that Mandatory Borrowings shall be made in
--------
the amounts required by Section 1.01(d). More than one Borrowing may be
incurred on any day, provided, that at no time shall there be outstanding more
--------
than eight Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make
-------------------
a Borrowing of Loans hereunder (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), an Authorized Officer of the Borrower shall give the
Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time),
at least three Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Eurodollar Loans, and at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Base Rate Loans to be made hereunder.
Each such
<PAGE>
notice (each, a "Notice of Borrowing") shall, except as otherwise expressly
provided in Section 1.10, be irrevocable, and, in the case of each written
notice and each confirmation of telephonic notice, shall be in the form of
Exhibit A, appropriately completed to specify: (i) the aggregate principal
amount of the Revolving Loans to be made pursuant to such Borrowing, (ii) the
date of such Borrowing (which shall be a Business Day), (iii) whether the
respective Borrowing shall consist of Term Loans or Revolving Loans, (iv)
whether the respective Borrowing shall consist of Base Rate Loans or, to the
extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto and (v) in the case of a
Borrowing of Revolving Loans the proceeds of which are to be utilized to
finance, in whole or in part, the purchase price of a Permitted Acquisition, (x)
a reference to the officer's certificate, if any, delivered in accordance with
Section 8.14, (y) the aggregate principal amount of such Revolving Loans to be
utilized in connection with such Permitted Acquisition and (z) the Total
Unutilized Revolving Loan Commitment then in effect after giving effect to the
respective Permitted Acquisition (and all payments to be made in connection
therewith). The Administrative Agent shall promptly give each Bank which is
required to make Loans of the Tranche specified in the respective Notice of
Borrowing, written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing, of such Bank's proportionate share thereof and of
the other matters required by the immediately preceding sentence to be specified
in the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to incur Swingline Loans
hereunder, an Authorized Officer of the Borrower shall give BTCo not later than
12:00 Noon (New York time) on the day such Swingline Loan is to be made, written
notice (or telephonic notice promptly confirmed in writing) of each Swingline
Loan to be made hereunder. Each such notice shall be irrevocable and shall
specify in each case (x) the date of such Borrowing (which shall be a Business
Day) and (y) the aggregate principal amount of the Swingline Loan to be made
pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice (or deemed
notice) specified in Section 1.01(d), with the Borrower irrevocably agreeing, by
its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as
set forth in such Section 1.01(d).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or BTCo (in the case of a Borrowing of Swingline Loans) or
the respective Letter of Credit Issuer (in the case of the issuance of Letters
of Credit), as the case may be, may prior to receipt of written confirmation act
without liability upon the basis of such telephonic notice, believed by the
Administrative Agent, BTCo or such Letter of Credit Issuer, as the case may be,
in good faith to be from an Authorized Officer of the Borrower. In each such
case, the Administrative Agent's, BTCo's or the respective Letter of Credit
Issuer's, as the case may be, record of the terms of such telephonic notice
shall be conclusive evidence of the contents of such notice, absent manifest
error.
1.04 Disbursement of Funds. (a) Not later than 1:00 P.M. (New York
---------------------
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later
<PAGE>
than 2:00 P.M. (New York time) on the date specified in Section 1.03(b)(i) or
(y) in the case of Mandatory Borrowings, not later than 12:00 Noon (New York
time) on the date specified in Section 1.01(d)), each Bank with a Commitment
under the respective Tranche will make available its pro rata share (determined
--- ----
in accordance with Section 1.07), if any, of each Borrowing requested to be made
on such date (or in the case of Swingline Loans, BTCo shall make available the
full amount thereof) in the manner provided below. All amounts shall be made
available to the Administrative Agent in U.S. Dollars and in immediately
available funds at the Payment Office and the Administrative Agent promptly will
make available to the Borrower by depositing to its account at the Payment
Office the aggregate of the amounts so made available in the type of funds
received. Unless the Administrative Agent shall have been notified by any Bank
prior to the date of Borrowing that such Bank does not intend to make available
to the Administrative Agent its portion of the Borrowing or Borrowings to be
made on such date, the Administrative Agent may assume that such Bank has made
such amount available to the Administrative Agent on such date of Borrowing, and
the Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Bank and the Administrative Agent has made
available same to the Borrower, the Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Borrower,
and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to recover
on demand from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative Agent, at a
rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds
Rate or (y) if paid by the Borrower, the then applicable rate of interest,
calculated in accordance with Section 1.08.
(b) Nothing in this Agreement shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by such
Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
-----
and interest on, all the Loans made to it by each Bank shall be set forth on the
Register maintained by the Administrative Agent pursuant to Section 13.17 and,
subject to the provisions of Section 1.05(f), shall be evidenced (i) if Term
Loans, by a promissory note substantially in the form of Exhibit B-1 with blanks
appropriately completed in conformity herewith (each, a "Term Note" and,
collectively, the "Term Notes"), (ii) if Revolving Loans, by a promissory note
substantially in the form of Exhibit B-2 with blanks appropriately completed in
conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving
Notes") and (iii) if Swingline Loans, by a promissory note substantially in the
form of Exhibit B-3 with blanks appropriately completed in conformity herewith
(the "Swingline Note").
<PAGE>
(b) The Term Note issued to each Bank with a Term Loan Commitment or
outstanding Term Loans shall (i) be executed by the Borrower, (ii) be payable to
such Bank or its registered assigns and be dated the Initial Borrowing Date (or,
in the case of any Term Note issued after the Initial Borrowing Date, the date
of issuance thereof), (iii) be in a stated principal amount equal to the Term
Loan Commitment of such Bank on the Initial Borrowing Date (or, in the case of
any Term Note issued after the Initial Borrowing Date, in a stated principal
amount equal to the outstanding principal amount of the Term Loan of such Bank
on the date of the issuance thereof) and be payable in the principal amount of
Term Loans evidenced thereby from time to time, (iv) mature on the Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary repayment as provided in
Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each RL Bank shall (i) be executed by
the Borrower, (ii) be payable to such RL Bank or its registered assigns and be
dated the date of issuance thereof, (iii) be in a stated principal amount equal
to the Revolving Loan Commitment of such RL Bank and be payable in the principal
amount of the outstanding Revolving Loans evidenced thereby, (iv) mature on the
Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment
as provided in Section 4.01 and mandatory repayment as provided in Section 4.02
and (vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(d) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to BTCo or its registered assigns and be dated the
Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline
Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the
Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as
provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and
(vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(e) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in such notation shall not affect the Borrower's obligations in
respect of such Loans.
(f) Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, Notes shall only be delivered to Banks which at any
time specifically request the delivery of such Notes. No failure of any Bank to
request or obtain a Note evidencing its Loans to the Borrower shall affect or in
any manner impair the obligations of the Borrower to pay the Loans (and all
related Obligations) which would otherwise be evidenced thereby in accordance
with the requirements of this Agreement, and shall not in any way affect the
security or
<PAGE>
guaranties therefor provided pursuant to the various Credit Documents. Any Bank
which does not have a Note evidencing its outstanding Loans shall in no event be
required to make the notations otherwise described in preceding clause (e). At
any time when any Bank requests the delivery of a Note to evidence any of its
Loans, the Borrower shall promptly execute and deliver to the respective Bank
the requested Note in the appropriate amount or amounts to evidence such Loans.
1.06 Conversions. The Borrower shall have the option to convert on
-----------
any Business Day occurring on or after the Initial Borrowing Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of Loans (other than Swingline Loans, which shall
at all times be maintained as Base Rate Loans) made pursuant to one or more
Borrowings of one or more Types of Loans under a single Tranche into a Borrowing
or Borrowings of another Type of Loan under such Tranche; provided, that (i)
--------
except as otherwise provided in Section 1.10(b) or unless the Borrower pays all
breakage costs and other amounts owing to each Bank pursuant to Section 1.11
concurrently with any such conversion, Eurodollar Loans may be converted into
Base Rate Loans only on the last day of an Interest Period applicable to the
Loans being converted, and no partial conversion of a Borrowing of Eurodollar
Loans shall reduce the outstanding principal amount of the Eurodollar Loans made
pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable
thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no
Default or Event of Default is in existence on the date of the conversion, (iii)
unless the Administrative Agent has determined that the Syndication Date has
occurred (at which time this clause (iii) shall no longer be applicable), prior
to the 90th day after the Initial Borrowing Date, conversions of Base Rate Loans
into Eurodollar Loans may only be made if any such conversion is effective on
the first day of the first, second or third Interest Period referred to in
clause (y) of each of Sections 1.01(a)(iii) and 1.01(b)(ii) and so long as such
conversion does not result in a greater number of Borrowings of Eurodollar Loans
prior to the 90th day after the Initial Borrowing Date as are permitted under
Sections 1.01(a)(iii) and 1.01(b)(ii) and (iv) Borrowings of Eurodollar Loans
resulting from this Section 1.06 shall be limited in number as provided in
Section 1.02. Each such conversion shall be effected by the Borrower by giving
the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York
time), at least three Business Days' (or one Business Day's in the case of a
conversion into Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each, a "Notice of Conversion") specifying the
Loans to be so converted, the Borrowing(s) pursuant to which the Loans were made
and, if to be converted into a Borrowing of Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Administrative Agent shall give
each Bank prompt notice of any such proposed conversion affecting any of its
Loans. Upon any such conversion, the proceeds thereof will be deemed to be
applied directly on the day of such conversion to prepay the outstanding
principal amount of the Loans being converted.
1.07 Pro Rata Borrowings. All Borrowings of Term Loans and Revolving
-------------------
Loans under this Agreement shall be incurred by the Borrower from the Banks pro
---
rata on the basis of such Banks' Term Loan Commitments or Revolving Loan
- ----
Commitments, as the case may be; provided that all Borrowings of Revolving Loans
--------
made pursuant to a Mandatory Borrowing shall be incurred from the RL Banks pro
---
rata on the basis of their respective Adjusted RL Percentages.
- ----
<PAGE>
It is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans to be made by it hereunder, regardless of the
failure of any other Bank to fulfill its commitments hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in respect
--------
of the unpaid principal amount of each Base Rate Loan made to it from the date
of the Borrowing thereof until the earlier of (i) the maturity (whether by
acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of
such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per
annum which shall at all times be the relevant Applicable Margin plus the Base
----
Rate, each as in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan made to it from the date of the
Borrowing thereof until the earlier of (i) the maturity (whether by acceleration
or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar
Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as
applicable, at a rate per annum which shall at all times be the relevant
Applicable Margin plus the Eurodollar Rate for such Interest Period, each as in
----
effect from time to time.
(c) To the extent permitted by law, overdue principal and overdue
interest in respect of each Loan shall, in each case, bear interest at a rate
per annum equal to the greater of (x) the rate which is 2% in excess of the rate
borne by such Loan immediately prior to the respective payment default and (y)
the rate which is 2% in excess of the rate otherwise applicable to Base Rate
Loans from time to time. Interest which accrues under this Section 1.08(c)
shall be payable on demand.
(d) Interest shall accrue from and including the date of any Borrowing
to but excluding the date of any repayment thereof and shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment
Date, (ii) in respect of each Eurodollar Loan, on (x) the date of any conversion
into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable
(on the amount converted) and (y) the last day of each Interest Period
applicable thereto and, in the case of an Interest Period in excess of three
months, on each date occurring at three month intervals after the first day of
such Interest Period and (iii) in respect of each Loan, on (x) the date of any
prepayment or repayment thereof (on the amount prepaid or repaid), (y) at
maturity (whether by acceleration or otherwise) and (z) after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 13.07(b).
(f) Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for the respective Interest Period or
Interest Periods and shall promptly notify the Borrower and the Banks thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
<PAGE>
1.09 Interest Periods. At the time the Borrower gives a Notice of
----------------
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans (in the case of any subsequent Interest Period),
the Borrower shall have the right to elect by giving the Administrative Agent
written notice (or telephonic notice promptly confirmed in writing) of the
Interest Period applicable to such Borrowing, which Interest Period shall, at
the option of the Borrower (but otherwise subject to clause (y) of the proviso
to Sections 1.01(a)(iii) and 1.01(b)(ii) and to clause (iii) of the proviso to
Section 1.06), be a one, two, three, six or, to the extent available to each
Bank with outstanding Loans and/or Commitments under the respective Tranche,
nine or twelve month period. Notwithstanding anything to the contrary contained
above:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period applicable thereto
expires;
(iii) if any Interest Period for any Borrowing of Eurodollar Loans
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period for any
--------
Borrowing of Eurodollar Loans would otherwise expire on a day which is not
a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(v) no Interest Period for a Borrowing under a Tranche shall be
selected which would extend beyond the respective Maturity Date for such
Tranche;
(vi) no Interest Period may be elected at any time when a Default or
an Event of Default is then in existence; and
(vii) no Interest Period in respect of any Borrowing of Term Loans
shall be elected which extends beyond any date upon which a Scheduled
Repayment will be required to be made under Section 4.02(b) if, after
giving effect to the election of such Interest Period, the aggregate
principal amount of such Term Loans which have Interest Periods which will
expire after such date will be in excess of the aggregate principal
<PAGE>
amount of such Term Loans then outstanding less the aggregate amount of
such required Scheduled Repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to the respective
Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to
have elected to convert such Borrowing into a Borrowing of Base Rate Loans
effective as of the expiration date of such current Interest Period.
1.10 Increased Costs; Illegality; etc. (a) In the event that (x) in
---------------------------------
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Bank, shall have determined in good faith
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto):
(i) on any Interest Determination Date, that, by reason of any
changes arising after the Effective Date affecting the interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans because of (x) any change since the Effective Date in
any applicable law, governmental rule, regulation, guideline, order or
request (whether or not having the force of law), or in the interpretation
or administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline, order or request (other than, in
each case, any such change with respect to taxes or any similar charges),
such as, for example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the Eurodollar
Rate and/or (y) other circumstances affecting such Bank, the interbank
Eurodollar market or the position of such Bank in such market (other than
circumstances relating to taxes or any similar charges); or
(iii) at any time since the Effective Date, that the making or
continuance of any Eurodollar Loan has become unlawful by compliance by
such Bank with any law, governmental rule, regulation, guideline or order
(or would conflict with any governmental rule, regulation, guideline,
request or order not having the force of law but with which such Bank
customarily complies even though the failure to comply therewith would not
be unlawful), or has become impracticable as a result of a contingency
occurring after the Effective Date which materially and adversely affects
the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower and (except in the case of clause (i)) to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter, (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the
<PAGE>
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred (including by way of
conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause
(ii) above, the Borrower agrees, subject to the provisions of Section 13.18 (to
the extent applicable), to pay to such Bank, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to compensate such Bank for such increased costs
or reductions in amounts received or receivable hereunder (a written notice as
to the additional amounts owed to such Bank, showing in reasonable detail the
basis for the calculation thereof, prepared in good faith and submitted to the
Borrower by such Bank shall, absent manifest error, be final and conclusive and
binding upon all parties hereto, although the failure to give any such notice
shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section 1.10(a) upon the subsequent receipt
of such notice) and (z) in the case of clause (iii) above, the Borrower shall
take one of the actions specified in Section 1.10(b) as promptly as practicable
and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Administrative
Agent telephonic notice (confirmed promptly in writing) thereof on the same date
that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or
(iii)), or (ii) if the affected Eurodollar Loan is then outstanding, upon at
least three Business Days' notice to the Administrative Agent, require the
affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which
conversion, in the case of the circumstance described in Section 1.10(a)(iii),
shall occur no later than the last day of the Interest Period then applicable to
such Eurodollar Loan or such earlier day as shall be required by applicable
law); provided, that if more than one Bank is affected at any time, then all
--------
affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the Effective Date,
the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Bank or any corporation controlling such Bank
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Bank's or such
other corporation's capital or assets as a consequence of such Bank's Commitment
or Commitments or its obligations hereunder to the Borrower to a level below
that which such Bank or such other corporation could have achieved but for such
adoption, effectiveness, change or compliance (taking into consideration such
Bank's or such other corporation's policies with respect to capital adequacy),
then from time to time, upon written demand by such Bank (with a copy to the
Administrative Agent),
<PAGE>
accompanied by the notice referred to in the last sentence of this clause (c),
the Borrower agrees, subject to the provisions of Section 13.18 (to the extent
applicable), to pay to such Bank such additional amount or amounts as will
compensate such Bank or such other corporation for such reduction in the rate of
return to such Bank or such other corporation. Each Bank, upon determining in
good faith that any additional amounts will be payable pursuant to this Section
1.10(c), will give prompt written notice thereof to the Borrower (a copy of
which shall be sent by such Bank to the Administrative Agent), which notice
shall set forth in reasonable detail the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligation to pay additional amounts pursuant
to this Section 1.10(c) upon the subsequent receipt of such notice. In
determining any additional amounts owing under this Section 1.10(c), each Bank
will act reasonably and in good faith and will use averaging and attribution
methods which are reasonable; provided that such Bank's reasonable good faith
--------
determination of compensation owing under this Section 1.10(c) shall, absent
manifest error, be final and conclusive and binding on all the parties hereto.
1.11 Compensation. The Borrower agrees, subject to the provisions of
------------
Section 13.18 (to the extent applicable), to compensate each Bank, promptly upon
its written request (which request shall set forth in reasonable detail the
basis for requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Loans but excluding any loss of
anticipated profits) which such Bank may sustain: (i) if for any reason (other
than a default by such Bank or any Agent) a Borrowing of, or conversion from or
into, Eurodollar Loans does not occur on a date specified therefor in a Notice
of Borrowing or Notice of Conversion given by the Borrower (whether or not
withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii)
if any repayment (including any repayment made pursuant to Section 4.01 or 4.02
or as a result of an acceleration of the Loans pursuant to Section 10 or as a
result of the replacement of a Bank pursuant to Section 1.13 or 13.12(b)) or
conversion of any Eurodollar Loans of the Borrower occurs on a date which is not
the last day of an Interest Period applicable thereto; (iii) if any prepayment
of any Eurodollar Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans when required by the terms
of this Agreement or (y) an election made by the Borrower pursuant to Section
1.10(b). Each Bank's calculation of the amount of compensation owing pursuant
to this Section 1.11 shall be made in good faith. A Bank's basis for requesting
compensation pursuant to this Section 1.11 and a Bank's calculation of the
amount thereof made in accordance with the requirements of this Section 1.11,
shall, absent manifest error, be final and conclusive and binding on all parties
hereto.
1.12 Change of Lending Office. (a) Each Bank may at any time or
------------------------
from time to time designate, by written notice to the Administrative Agent to
the extent not already reflected on Schedule II, one or more lending offices
(which, for this purpose, may include Affiliates of the respective Bank) for the
various Loans made, and Letters of Credit participated in, by such Bank;
provided that, for designations made after the Effective Date, to the extent
- --------
such designation shall result in increased costs under Section 1.10, 2.05 or
4.04 in excess of those which would be charged in the absence of the designation
of a different lending office (including
<PAGE>
a different Affiliate of the respective Bank), then the Borrower shall not be
obligated to pay such excess increased costs (although the Borrower, in
accordance with and pursuant to the other provisions of this Agreement, shall be
obligated to pay the costs which would apply in the absence of such designation
and any subsequent increased costs of the type described above resulting from
changes after the date of the respective designation). Each lending office and
Affiliate of any Bank designated as provided above shall, for all purposes of
this Agreement, be treated in the same manner as the respective Bank (and shall
be entitled to all indemnities and similar provisions in respect of its acting
as such hereunder).
(b) Each Bank agrees that, upon the occurrence of any event giving
rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or 4.04
with respect to such Bank, it will, if requested by the Borrower, use reasonable
efforts (subject to overall policy considerations of such Bank) to designate
another lending office for any Loans or Letters of Credit affected by such
event, with the object of avoiding the consequences of the event giving rise to
the operation of any such Section; provided, that such designation is made on
--------
such terms that such Bank and its lending office suffer no economic, legal or
regulatory disadvantage. Nothing in this Section 1.12 shall affect or postpone
any of the obligations of the Borrower or the right of any Bank provided in
Section 1.10, 2.05 or 4.04 (although each such Bank shall nevertheless have an
obligation to change its applicable lending office subject to the terms set
forth in the immediately preceding sentence).
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting
--------------------
Bank, (y) upon the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Bank which results in such Bank charging to the Borrower
increased costs in a material amount in excess of those being generally charged
by the other Banks or (z) in the case of a refusal by a Bank to consent to a
proposed change, waiver, discharge or termination with respect to this Agreement
which has been approved by the Required Banks as provided in Section 13.12(b),
the Borrower shall have the right, in accordance with Section 13.04(b), if no
Default or Event of Default then exists or would exist after giving effect to
such replacement, to replace such Bank (the "Replaced Bank") with one or more
other Eligible Transferee or Transferees, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank") and each of which shall be reasonably acceptable to the Administrative
Agent or, at the option of the Borrower, to replace only (a) the Revolving Loan
Commitment (and outstandings pursuant thereto) of the Replaced Bank with an
identical Revolving Loan Commitment provided by the Replacement Bank or (b) in
the case of a replacement as provided in Section 13.12(b) where the consent of
the respective Bank is required with respect to less than all Tranches of its
Loans or Commitments, the Commitments and/or outstanding Loans of such Bank in
respect of each Tranche where the consent of such Bank would otherwise be
individually required, with identical Commitments and/or Loans of the respective
Tranche provided by the Replacement Bank; provided that:
--------
(i) at the time of any replacement pursuant to this Section 1.13, the
Replacement Bank shall enter into one or more Assignment and Assumption
Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant
to said Section 13.04(b)
<PAGE>
to be paid by the Replacement Bank) pursuant to which the Replacement Bank
shall acquire all of the Commitments and outstanding Loans (or, in the case
of the replacement of only (a) the Revolving Loan Commitment, the Revolving
Loan Commitment and outstanding Revolving Loans and participations in
Letter of Credit Outstandings and/or (b) the outstanding Term Loans, the
outstanding Term Loans) of, and in each case (except for the replacement of
only the outstanding Term Loans of the respective Bank) participations in
Letters of Credit by, the Replaced Bank and, in connection therewith, shall
pay to (x) the Replaced Bank in respect thereof an amount equal to the sum
of (A) an amount equal to the principal of, and all accrued interest on,
all outstanding Loans (or of the Loans of the respective Tranche being
replaced) of the Replaced Bank, (B) an amount equal to all Unpaid Drawings
(unless there are no Unpaid Drawings with respect to the Tranche being
replaced) that have been funded by (and not reimbursed to) such Replaced
Bank, together with all then unpaid interest with respect thereto at such
time and (C) an amount equal to all accrued, but theretofore unpaid, Fees
owing to the Replaced Bank (but only with respect to the relevant Tranche,
in the case of the replacement of less than all Tranches of Loans then held
by the respective Replaced Bank) pursuant to Section 3.01, (y) except in
the case of the replacement of only the outstanding Term Loans of a
Replaced Bank, each Letter of Credit Issuer an amount equal to such
Replaced Bank's RL Percentage of any Unpaid Drawing relating to Letters of
Credit issued by such Letter of Credit Issuer (which at such time remains
an Unpaid Drawing) to the extent such amount was not theretofore funded by
such Replaced Bank and (z) in the case of any replacement of Revolving Loan
Commitments, BTCo an amount equal to such Replaced Bank's Adjusted RL
Percentage of any Mandatory Borrowing to the extent such amount was not
theretofore funded by such Replaced Bank; and
(ii) all obligations of the Borrower then owing to the Replaced Bank
(other than those (a) specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid, but including all amounts, if any, owing under Section 1.11 or (b)
relating to any Tranche of Loans and/or Commitments of the respective
Replaced Bank which will remain outstanding after giving effect to the
respective replacement) shall be paid in full to such Replaced Bank
concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, recordation of the
assignment on the Register by the Administrative Agent pursuant to Section 13.17
and, if so requested by the Replacement Bank, delivery to the Replacement Bank
of the appropriate Note or Notes executed by the Borrower, (x) the Replacement
Bank shall become a Bank hereunder and, unless the respective Replaced Bank
continues to have outstanding Term Loans and/or a Revolving Loan Commitment
hereunder, the Replaced Bank shall cease to constitute a Bank hereunder, except
with respect to indemnification provisions under this Agreement (including,
without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which
shall survive as to such Replaced Bank and (y) except in the case of the
replacement of only outstanding Term Loans, the Adjusted RL
<PAGE>
Percentages of the Banks shall be automatically adjusted at such time to give
effect to such replacement.
SECTION 2. Letters of Credit.
-----------------
2.01 Letters of Credit. (a) Subject to and upon the terms and
-----------------
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time after the Initial Borrowing Date and prior to
the tenth Business Day (or the 30th day in the case of Trade Letters of Credit)
preceding the Revolving Loan Maturity Date to issue on a sight basis, (x) for
the account of the Borrower and for the benefit of any holder (or any trustee,
agent or other similar representative for any such holders) of L/C Supportable
Indebtedness, irrevocable sight standby letters of credit in a form customarily
used by such Letter of Credit Issuer or in such other form as has been approved
by such Letter of Credit Issuer (each such standby letter of credit, a "Standby
Letter of Credit") in support of such L/C Supportable Indebtedness and (y) for
the account of the Borrower and for the benefit of sellers of goods and
materials to the Borrower or any of its Subsidiaries in the ordinary course of
business, irrevocable sight trade letters of credit in a form customarily used
by such Letter of Credit Issuer or in such other form as has been approved by
such Letter of Credit Issuer (each such trade letter of credit, a "Trade Letter
of Credit," and each such Standby Letter of Credit and Trade Letter of Credit, a
"Letter of Credit" and, collectively, the "Letters of Credit").
(b) Subject to and upon the terms and conditions set forth herein,
each Letter of Credit Issuer hereby agrees that it will, at any time and from
time to time after the Initial Borrowing Date and prior to the tenth Business
Day (or the 30th day in the case of Trade Letters of Credit) preceding the
Revolving Loan Maturity Date, following its receipt of the respective Letter of
Credit Request, issue for the account of the Borrower one or more Letters of
Credit, (x) in the case of Trade Letters of Credit, in support of trade
obligations of the Borrower or any of its Subsidiaries that arise in the
ordinary course of business or (y) in the case of Standby Letters of Credit, in
support of such L/C Supportable Indebtedness as is permitted to remain
outstanding hereunder. Notwithstanding the foregoing, no Letter of Credit
Issuer shall be under any obligation to issue any Letter of Credit if at the
time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit Issuer shall prohibit, or
request that such Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which such
Letter of Credit Issuer is not otherwise compensated) not in effect on the
Effective Date, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Letter of Credit Issuer as of the
Effective Date and which such Letter of Credit Issuer in good faith deems
material to it; or
<PAGE>
(ii) such Letter of Credit Issuer shall have received written notice
from the Borrower or the Required Banks prior to the issuance of such
Letter of Credit of the type described in clause (vi) of Section 2.01(c) or
the last sentence of Section 2.02(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $25,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans made by the Non-Defaulting Banks and then
outstanding and all Swingline Loans then outstanding, the Adjusted Total
Revolving Loan Commitment at such time; (ii) (x) each Standby Letter of Credit
shall have an expiry date occurring not later than one year after such Standby
Letter of Credit's date of issuance, provided that any such Standby Letter of
--------
Credit may be extendable for successive periods of up to one year, but not
beyond the tenth Business Day preceding the Revolving Loan Maturity Date, on
terms acceptable to the Letter of Credit Issuer and (y) each Trade Letter of
Credit shall have an expiry date occurring not later than 180 days after such
Trade Letter of Credit's date of issuance; (iii) (x) no Standby Letter of Credit
shall have an expiry date occurring later than the tenth Business Day preceding
the Revolving Loan Maturity Date and (y) no Trade Letter of Credit shall have an
expiry date occurring later than 30 days prior to the Revolving Loan Maturity
Date; (iv) each Letter of Credit shall be denominated in U.S. Dollars; (v) the
Stated Amount of each Letter of Credit shall not be less than $100,000 or such
lesser amount as is acceptable to the respective Letter of Credit Issuer; and
(vi) no Letter of Credit Issuer will issue any Letter of Credit after it has
received written notice from the Borrower or the Required Banks stating that a
Default or an Event of Default exists until such time as such Letter of Credit
Issuer shall have received a written notice of (x) rescission of such notice
from the party or parties originally delivering the same or (y) a waiver of such
Default or Event of Default by the Required Banks.
(d) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Defaulting Banks, including by cash collateralizing such
Defaulting Bank's or Banks' Adjusted RL Percentage of the Letter of Credit
Outstandings, as the case may be.
(e) Schedule XIV hereto contains a description of all letters of
credit issued by FNBC for the account of Pacer Logistics or Pacific Motor
Transport Company and outstanding on the Initial Borrowing Date. Each such
letter of credit, as amended on the Initial Borrowing Date to change the account
party thereon to "Pacer International, Inc.", including any extension or renewal
thereof (each, as amended from time to time in accordance with the terms hereof
and thereof, an "Existing Letter of Credit") shall constitute a "Letter of
Credit" for all purposes of this Agreement, issued, for purposes of Section
2.03(a), on the Initial Borrowing Date. FNBC shall constitute the "Letter of
Credit Issuer" with respect to each such Letter of Credit for all purposes of
this Agreement.
<PAGE>
2.02 Letter of Credit Requests. (a) Whenever the Borrower desires
-------------------------
that a Letter of Credit be issued, the Borrower shall give the Administrative
Agent and the respective Letter of Credit Issuer written notice thereof prior to
12:00 Noon (New York time) at least three Business Days (or such shorter period
as may be acceptable to the respective Letter of Credit Issuer) prior to the
proposed date of issuance (which shall be a Business Day) which written notice
shall be in the form of Exhibit C (each, a "Letter of Credit Request"). Each
Letter of Credit Request shall include any other documents as such Letter of
Credit Issuer customarily requires in connection therewith.
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and it will not violate the requirements of, Section
2.01(c). Unless the respective Letter of Credit Issuer has received notice from
the Borrower, any Agent or the Required Banks before it issues a Letter of
Credit that one or more of the applicable conditions specified in Section 5 or
6, as the case may be, are not then satisfied, or that the issuance of such
Letter of Credit would violate Section 2.01(c), then such Letter of Credit
Issuer may issue the requested Letter of Credit for the account of the Borrower
in accordance with such Letter of Credit Issuer's usual and customary practice.
2.03 Letter of Credit Participations. (a) Immediately upon the
-------------------------------
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RL
Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's Adjusted RL Percentage, in such Letter of
Credit, each substitute Letter of Credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Administrative Agent for
the account of the RL Banks as provided in Section 3.01(b) and the Participants
shall have no right to receive any portion of any Facing Fees with respect to
such Letters of Credit) and any security therefor or guaranty pertaining
thereto. Upon any change in the Revolving Loan Commitments or the Adjusted RL
Percentages of the RL Banks pursuant to Section 1.13 or 13.04(b) or as a result
of a Bank Default, it is hereby agreed that, with respect to all outstanding
Letters of Credit and Unpaid Drawings with respect thereto, there shall be an
automatic adjustment to the participations pursuant to this Section 2.03 to
reflect the new Adjusted RL Percentages of the assigning and assignee Bank or of
all RL Banks, as the case may be.
(b) In determining whether to pay under any Letter of Credit, no
Letter of Credit Issuer shall have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by any Letter of Credit Issuer under or in
connection with any Letter of Credit issued by it if taken or omitted in the
absence of gross negligence or willful misconduct, shall not create for such
Letter of Credit Issuer any resulting liability.
<PAGE>
(c) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Section 2.04(a), such Letter of Credit Issuer shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each
Participant of such failure, and each such Participant shall promptly and
unconditionally pay to the Administrative Agent for the account of such Letter
of Credit Issuer, the amount of such Participant's Adjusted RL Percentage of
such payment in U.S. Dollars and in same day funds. If the Administrative Agent
so notifies any Participant required to fund a payment under a Letter of Credit
prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall
make available to the Administrative Agent at the Payment Office for the account
of the respective Letter of Credit Issuer such Participant's Adjusted RL
Percentage of the amount of such payment on such Business Day in same day funds
(and, to the extent such notice is given after 11:00 A.M. (New York time) on any
Business Day, such Participant shall make such payment on the immediately
following Business Day). If and to the extent such Participant shall not have
so made its Adjusted RL Percentage of the amount of such payment available to
the Administrative Agent for the account of the respective Letter of Credit
Issuer, such Participant agrees to pay to the Administrative Agent for the
account of such Letter of Credit Issuer, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Administrative Agent for the account of the Letter of
Credit Issuer at the overnight Federal Funds Rate. The failure of any
Participant to make available to the Administrative Agent for the account of the
respective Letter of Credit Issuer its Adjusted RL Percentage of any payment
under any Letter of Credit issued by it shall not relieve any other Participant
of its obligation hereunder to make available to the Administrative Agent for
the account of such Letter of Credit Issuer its applicable Adjusted RL
Percentage of any payment under any such Letter of Credit on the date required,
as specified above, but no Participant shall be responsible for the failure of
any other Participant to make available to the Administrative Agent for the
account of such Letter of Credit Issuer such other Participant's Adjusted RL
Percentage of any such payment.
(d) Whenever any Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of such Letter of Credit Issuer any payments from the Participants
pursuant to clause (c) above, such Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its Adjusted RL Percentage thereof, in U.S. Dollars
and in same day funds, an amount equal to such Participant's Adjusted RL
Percentage of the principal amount thereof and interest thereon accruing after
the purchase of the respective participations.
(e) Each Letter of Credit Issuer shall, promptly after each issuance
of, or amendment or modification to, a Standby Letter of Credit issued by it,
give the Administrative Agent, each Participant and the Borrower written notice
of the issuance of, or amendment or modification to, such Standby Letter of
Credit, which notice shall be accompanied by a copy of the Standby Letter of
Credit or Standby Letters of Credit issued by it and each such amendment or
modification thereto.
<PAGE>
(f) Each Letter of Credit Issuer (other than BTCo) shall deliver to
the Administrative Agent, promptly on the first Business Day of each week, by
facsimile transmission, the aggregate daily Stated Amount available to be drawn
under the outstanding Trade Letters of Credit issued by such Letter of Credit
Issuer for the previous week. The Administrative Agent shall, within 10 days
after the last Business Day of each calendar month, deliver to each Participant
a report setting forth for such preceding calendar month the aggregate daily
Stated Amount available to be drawn under all outstanding Trade Letters of
Credit during such calendar month.
(g) The obligations of the Participants to make payments to the
Administrative Agent for the account of the respective Letter of Credit Issuer
with respect to Letters of Credit issued by it shall be irrevocable and not
subject to counterclaim, set-off or other defense or any other qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any
Agent, any Letter of Credit Issuer, any Bank, or any other Person, whether
in connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Borrower or any of its Subsidiaries and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
--------------------------------------------
hereby agrees to reimburse each Letter of Credit Issuer, by making payment to
the Administrative Agent in U.S. Dollars and in immediately available funds at
the Payment Office, for any payment or disbursement made by such Letter of
Credit Issuer under any Letter of Credit issued by it (each such amount so paid
or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in
any event on the date of (or, if not notified by the respective Letter of Credit
Issuer prior to 1:00 P.M. (New York time) on the date of such payment or
disbursement, on the Business Day following), such payment or disbursement, with
interest on the amount so paid or disbursed by such Letter of Credit Issuer, to
the extent not reimbursed prior to 2:00 P.M. (New York time) on
<PAGE>
Schedule I
the date of such payment or disbursement, on the Business Day following), such
payment or disbursement, with interest on the amount so paid or disbursed by
such Letter of Credit Issuer, to the extent not reimbursed prior to 2:00 P.M.
(New York time) on the date of such payment or disbursement, from and including
the date paid or disbursed to but not including the date such Letter of Credit
Issuer is reimbursed therefor at a rate per annum which shall be the then
Applicable Margin for Revolving Loans maintained as Base Rate Loans plus the
----
Base Rate, each as in effect from time to time (plus an additional 2% per annum
if not reimbursed by the third Business Day after the date of such payment or
disbursement), such interest also to be payable on demand; provided, that it is
--------
understood and agreed, however, that the notices referred to above in this
clause (a) shall not be required to be given if a Default or an Event of Default
under such Section 10.05 shall have occurred and be continuing, in which case
the Unpaid Drawings shall be due and payable immediately without presentment,
demand, protest or notice of any kind (all of which are hereby waived by each
Credit Party) and shall bear interest at a rate per annum which shall be (x)
until the third Business Day following the respective Drawing, the Applicable
Margin for Revolving Loans maintained as Base Rate Loans plus the Base Rate,
each as in effect from time to time, and (y) at all times on and after the third
Business Day following the respective Drawing, the rate per annum specified in
preceding clause (x) plus 2%. Each Letter of Credit Issuer shall provide the
----
Borrower prompt notice of any payment or disbursement made by it under any
Letter of Credit issued by it, although the failure of, or delay in, giving any
such notice shall not release or diminish the obligations of the Borrower under
this Section 2.04(a) or under any other Section of this Agreement.
(b) The Borrower's obligation under this Section 2.04 to reimburse the
respective Letter of Credit Issuer with respect to drawings on Letters of Credit
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or any of its Subsidiaries may have or
have had against such Letter of Credit Issuer, any Agent or any Bank or other
Person, including, without limitation, any defense based upon the failure of any
drawing under a Letter of Credit issued by it to conform to the terms of the
Letter of Credit or any nonapplication or misapplication by the beneficiary of
the proceeds of such drawing; provided, however, that the Borrower shall not be
-------- -------
obligated to reimburse such Letter of Credit Issuer for any wrongful payment
made by such Letter of Credit Issuer under a Letter of Credit issued by it as a
result of acts or omissions constituting willful misconduct or gross negligence
on the part of such Letter of Credit Issuer as determined by a court of
competent jurisdiction; provided, further, that any reimbursement made by the
-------- -------
Borrower shall be without prejudice to any claim it may have against such Letter
of Credit Issuer as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of such Letter of Credit Issuer.
2.05 Increased Costs. If after the Effective Date, any Letter of
---------------
Credit Issuer or any Participant determines that the adoption or effectiveness
of any applicable law, rule or regulation, order, guideline or request or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Letter of Credit
Issuer or any Participant with any request or directive (whether or not having
the force of law) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by such Letter
of Credit Issuer or such Participant's participation therein, or (ii) impose on
any Letter of Credit Issuer or any Participant any other conditions directly or
indirectly affecting
<PAGE>
this Agreement, any Letter of Credit or such Participant's participation
therein; and the result of any of the foregoing is to increase the cost to such
Letter of Credit Issuer or such Participant of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by such Letter of Credit Issuer or such Participant
hereunder or reduce the rate of return on its capital (other than any increased
costs or reduction in the amount received or receivable resulting from the
imposition of or a change in the rate of taxes or any similar charges) with
respect to Letters of Credit, then, upon written demand to the Borrower by such
Letter of Credit Issuer or such Participant (a copy of which notice shall be
sent by such Letter of Credit Issuer or such Participant to the Administrative
Agent), accompanied by the certificate described in the last sentence of this
Section 2.05, the Borrower agrees, subject to the provisions of Section 13.18
(to the extent applicable), to pay to such Letter of Credit Issuer or such
Participant such additional amount or amounts as will compensate such Letter of
Credit Issuer or such Participant for such increased cost or reduction. Any
Letter of Credit Issuer or any Participant, upon determining that any additional
amounts will be payable pursuant to this Section 2.05, will give prompt written
notice thereof to the Borrower, which notice shall include a certificate
submitted to the Borrower by such Letter of Credit Issuer or such Participant,
as the case may be (a copy of which certificate shall be sent by such Letter of
Credit Issuer or such Participant to the Administrative Agent), setting forth in
reasonable detail the basis for the determination of such additional amount or
amounts necessary to compensate such Letter of Credit Issuer or such Participant
as aforesaid and such certificate, if delivered in good faith, shall be final
and conclusive and binding on the Borrower absent manifest error, although the
failure to deliver any such certificate shall not release or diminish the
Borrower's obligations to pay additional amounts pursuant to this Section 2.05
upon subsequent receipt of such certificate.
SECTION 3. Fees; Commitments.
-----------------
3.01 Fees. (a) The Borrower shall pay to the Administrative Agent
----
for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment, a
commitment fee (the "Commitment Fee") for the period from the Effective Date to
but not including the Revolving Loan Maturity Date (or such earlier date as the
Total Revolving Loan Commitment shall have been terminated), computed at a rate
for each day equal to the relevant Applicable Margin (as in effect from time to
time) on the daily average Unutilized Revolving Loan Commitment of such Non-
Defaulting Bank. Accrued Commitment Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and on the Revolving Loan Maturity Date
(or such earlier date upon which the Total Revolving Loan Commitment is
terminated).
(b) The Borrower shall pay to the Administrative Agent for pro rata
--- ----
distribution to each Non-Defaulting Bank with a Revolving Loan Commitment (based
on its respective Adjusted RL Percentage), a fee in respect of each Letter of
Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Margin for Revolving Loans maintained as Eurodollar Loans then in
effect on the daily Stated Amount of such Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears on each Quarterly
Payment Date and upon the first day on or after the termination of the Total
Revolving Loan Commitment upon which no Letters of Credit remain outstanding.
<PAGE>
(c) The Borrower shall pay to each Letter of Credit Issuer a fee in
respect of each Letter of Credit issued by such Letter of Credit Issuer (the
"Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated
Amount of such Letter of Credit; provided, that in no event shall the annual
--------
Facing Fee with respect to each Letter of Credit be less than $500; it being
agreed that (x) on the date of issuance of any Letter of Credit and on each
anniversary thereof prior to the termination of such Letter of Credit, if $500
will exceed the amount of Facing Fees that will accrue with respect to such
Letter of Credit for the immediately succeeding 12-month period, the full $500
shall be payable on the date of issuance of such Letter of Credit and on each
such anniversary thereof prior to the termination of such Letter of Credit and
(y) if on the date of the termination of any Letter of Credit, $500 actually
exceeds the amount of Facing Fees paid or payable with respect to such Letter of
Credit for the period beginning on the date of the issuance thereof (or if the
respective Letter of Credit has been outstanding for more than one year, the
date of the last anniversary of the issuance thereof occurring prior to the
termination of such Letter of Credit) and ending on the date of the termination
thereof, an amount equal to such excess shall be paid as additional Facing Fees
with respect to such Letter of Credit on the next date upon which Facing Fees
are payable in accordance with the immediately succeeding sentence. Except as
provided in the immediately preceding sentence, accrued Facing Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and upon the
first day on or after the termination of the Total Revolving Loan Commitment
upon which no Letters of Credit remain outstanding.
(d) The Borrower shall pay directly to each Letter of Credit Issuer
upon each issuance of, payment under, and/or amendment of, a Letter of Credit
issued by such Letter of Credit Issuer such amount as shall at the time of such
issuance, payment or amendment be the administrative charge which such Letter of
Credit Issuer is generally charging for issuances of, payments under or
amendments of, letters of credit issued by it.
(e) The Borrower shall pay to each Agent, for its own account, such
other fees as may be agreed to in writing from time to time between the Borrower
and such Agent, when and as due.
(f) All computations of Fees shall be made in accordance with Section
13.07(b).
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
----------------------------------------------------------------
Loan Commitment. (a) Upon at least three Business Days' prior notice to the
- ---------------
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Banks), the Borrower shall have the
right, without premium or penalty, to terminate or partially reduce the Total
Unutilized Revolving Loan Commitment provided that (i) any such termination or
--------
partial reduction shall apply to proportionately and permanently reduce the
Revolving Loan Commitment of each Bank with such a Commitment, (ii) any partial
reduction pursuant to this Section 3.02(a) shall be in integral multiples of
$1,000,000 and (iii) no reduction to the Total Unutilized Revolving Loan
Commitment shall be in an amount which would cause the Revolving Loan Commitment
of any RL Bank to be reduced (as required by the preceding clause (i)) by an
amount which exceeds the remainder of (A) the Unutilized Revolving Loan
<PAGE>
Commitment of such RL Bank as in effect immediately before giving effect to such
reduction minus (B) such RL Bank's Adjusted RL Percentage of the aggregate
principal amount of Swingline Loans then outstanding.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
13.12(b), the Borrower shall have the right, subject to obtaining the consents
required by Section 13.12(b), upon five Business Days' prior written notice to
the Administrative Agent at its Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Banks), to terminate the entire
Revolving Loan Commitment of such Bank, so long as all Loans, together with
accrued and unpaid interest, Fees and all other amounts, owing to such Bank
(including all amounts, if any, owing pursuant to Section 1.11 but excluding
amounts owing in respect of Term Loans maintained by such Bank, if such Term
Loans are not being repaid pursuant to Section 13.12(b)) are repaid concurrently
with the effectiveness of such termination (at which time Schedule I shall be
deemed modified to reflect such changed amounts) and at such time, unless the
respective Bank continues to have outstanding Term Loans hereunder, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except with
respect to indemnifications under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to
such repaid Bank.
3.03 Mandatory Reduction of Commitments. (a) The Total Commitment
----------------------------------
(and the Term Loan Commitment and Revolving Loan Commitment of each Bank) shall
terminate in its entirety on July 15, 1999 unless the Initial Borrowing Date has
occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank with such a Commitment) shall terminate in its entirety
on the Initial Borrowing Date (after giving effect to the making of the Term
Loans on such date).
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each RL Bank) shall terminate in its entirety on the
Revolving Loan Maturity Date.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment shall be permanently
reduced from time to time to the extent required by Section 4.02.
(e) Each reduction to the Total Term Loan Commitment or Total
Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section
4.02) shall be applied proportionately to reduce the Term Loan Commitment or the
Revolving Loan Commitment, as the case may be, of each Bank with such a
Commitment.
<PAGE>
SECTION 4. Payments.
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4.01 Voluntary Prepayments. The Borrower shall have the right to
---------------------
prepay the Loans, and the right to allocate such prepayments to Term Loans,
Revolving Loans and/or Swingline Loans as the Borrower elects, in whole or in
part, without premium or penalty except as otherwise provided in this Agreement,
from time to time on the following terms and conditions:
(i) the Borrower shall give the Administrative Agent at its Notice
Office written notice (or telephonic notice promptly confirmed in writing)
of its intent to prepay the Loans, whether such Loans are Term Loans,
Revolving Loans or Swingline Loans, the amount of such prepayment, the
Types of Loans to be repaid and (in the case of Eurodollar Loans) the
specific Borrowing(s) pursuant to which made, which notice (I) shall be
given by the Borrower prior to 12:00 Noon (New York time) (x) at least one
Business Day prior to the date of such prepayment in the case of Term Loans
and Revolving Loans maintained as Base Rate Loans, (y) at least three
Business Days prior to the date of such prepayment in the case of
Eurodollar Loans and (z) on the date of such prepayment in the case of
Swingline Loans and (II) shall, except in the case of Swingline Loans,
promptly be transmitted by the Administrative Agent to each of the Banks;
(ii) each prepayment (other than prepayments in full of (I) all
outstanding Base Rate Loans or (II) any outstanding Borrowing of Eurodollar
Loans) shall be in an aggregate principal amount of at least (x)
$1,000,000, in the case of Eurodollar Loans, (y) $500,000, in the case of
Revolving Loans and Term Loans maintained as Base Rate Loans and (z)
$100,000, in the case of Swingline Loans and, in each case, if greater, in
integral multiples of $100,000, provided, that no partial prepayment of
--------
Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Eurodollar Loans outstanding pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto;
(iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section 4.01 on any date other than the last day of the Interest
Period applicable thereto, the Borrower shall pay the amounts required
pursuant to Section 1.11;
(iv) except as provided in clause (vi) below, each prepayment in
respect of any Loans made pursuant to a Borrowing shall be applied pro rata
--- ----
among such Loans, provided, that at the Borrower's election in connection
--------
with any prepayment of Revolving Loans pursuant to this Section 4.01, such
prepayment shall not be applied to any Revolving Loans of a Defaulting
Bank;
(v) each prepayment of principal of Term Loans pursuant to this
Section 4.01 shall be applied to reduce the then remaining Scheduled
Repayments on a pro rata basis; and
--- ----
(vi) in the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have
<PAGE>
been approved by the Required Banks as provided in Section 13.12(b), the
Borrower may, upon five Business Days' prior written notice to the
Administrative Agent at its Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Banks), repay all Loans of
such Bank (including all amounts, if any, owing pursuant to Section 1.11),
together with accrued and unpaid interest, Fees and all other amounts then
owing to such Bank (or owing to such Bank with respect to each Tranche
which gave rise to the need to obtain such Bank's individual consent) in
accordance with said Section 13.12(b), so long as (A) in the case of the
repayment of Revolving Loans of any Bank pursuant to this clause (vi), the
Revolving Loan Commitment of such Bank is terminated concurrently with such
repayment (at which time Schedule I shall be deemed modified to reflect the
changed Revolving Loan Commitments) and (B) the consents required by
Section 13.12(b) in connection with the repayment pursuant to this clause
(vi) shall have been obtained.
4.02 Mandatory Repayments and Commitment Reductions. (a) (i) If on
----------------------------------------------
any date the sum of (x) the aggregate outstanding principal amount of Revolving
Loans made by Non-Defaulting Banks and Swingline Loans (after giving effect to
all other repayments thereof on such date) and (y) the Letter of Credit
Outstandings on such date, exceeds the Adjusted Total Revolving Loan Commitment
as then in effect, the Borrower shall repay on such date the principal of
Swingline Loans, and if no Swingline Loans are or remain outstanding, the
principal of Revolving Loans of Non-Defaulting Banks in an aggregate amount
equal to such excess. If, after giving effect to the prepayment of all
outstanding Swingline Loans and all outstanding Revolving Loans of Non-
Defaulting Banks, the aggregate amount of Letter of Credit Outstandings exceeds
the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower
shall pay to the Administrative Agent at the Payment Office on such date an
amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate
amount of Letter of Credit Outstandings at such time) and the Administrative
Agent shall hold such payment as security for the obligations of the Borrower to
Non-Defaulting Banks hereunder pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Administrative
Agent.
(ii) On any date on which the aggregate outstanding principal amount
of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan
Commitment of such Defaulting Bank, the Borrower shall prepay on such date
principal of Revolving Loans of such Defaulting Bank in an amount equal to such
excess.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Term Loans, to the
extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(h),
a "Scheduled Repayment"):
Scheduled Repayment Date Amount
- ------------------------ ------
September 30, 1999 $ 337,500
<PAGE>
December 31, 1999 $ 337,500
March 31, 2000 $ 337,500
June 30, 2000 $ 337,500
September 30, 2000 $ 337,500
December 31, 2000 $ 337,500
March 31, 2001 $ 337,500
June 30, 2001 $ 337,500
September 30, 2001 $ 337,500
December 31, 2001 $ 337,500
March 31, 2002 $ 337,500
June 30, 2002 $ 337,500
September 30, 2002 $ 337,500
December 31, 2002 $ 337,500
March 31, 2003 $ 337,500
June 30, 2003 $ 337,500
September 30, 2003 $ 337,500
December 31, 2003 $ 337,500
March 31, 2004 $ 337,500
June 30, 2004 $ 337,500
September 30, 2004 $ 337,500
December 31, 2004 $ 337,500
March 31, 2005 $ 337,500
June 30, 2005 $ 337,500
September 30, 2005 $ 337,500
December 31, 2005 $ 337,500
March 31, 2006 $ 337,500
Term Loan Maturity Date $125,887,500
(c) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 4.02, on each date on or after the Effective Date upon
which the Borrower or any of its Subsidiaries receives Net Sale Proceeds from
any Asset Sale, an amount equal to the Applicable Prepayment Percentage of the
Net Sale Proceeds from such Asset Sale shall be applied as a mandatory repayment
and/or commitment reduction in accordance with the
<PAGE>
requirements of Sections 4.02(h) and (i); provided that (I) with respect to no
more than $15,000,000 in the aggregate of such Net Sale Proceeds received by the
Borrower and its Subsidiaries after the Effective Date in connection with one or
more Permitted Sale-Leaseback Transactions, such Net Sale Proceeds shall not
give rise to a mandatory repayment (and/or commitment reduction, as the case may
be) on such date to the extent (i) no Default or Event of Default then exists
and (ii) the Borrower delivers an officer's certificate to the Administrative
Agent on or prior to such date stating that such Net Sale Proceeds constitute
Net Sale Proceeds of a Permitted Sale-Leaseback Transaction consummated in
accordance with the requirements of Section 9.02(a) and the definition thereof
and (II) with respect to no more than $10,000,000 in the aggregate of such Net
Sale Proceeds received by the Borrower or its Subsidiaries in any fiscal year of
the Borrower, such Net Sale Proceeds shall not give rise to a mandatory
repayment (and/or commitment reduction, as the case may be) on such date to the
extent that no Default or Event of Default then exists and the Borrower delivers
a certificate to the Administrative Agent on or prior to such date stating that
such Net Sale Proceeds shall be used or contractually committed to be used to
purchase assets used or to be used in the businesses permitted pursuant to
Section 9.01 (including, without limitation (but only to the extent permitted by
Section 9.02), the purchase of the capital stock of a Person engaged in such
businesses) within 270 days following the date of receipt of such Net Sale
Proceeds from such Asset Sale (which certificate shall set forth the estimates
of the proceeds to be so expended); provided further that (i) if all or any
portion of such Net Sale Proceeds are not so used (or contractually committed to
be used) within such 270 day period, such remaining portion shall be applied on
the last day of such period as a mandatory repayment and/or commitment reduction
as provided above (without giving effect to the immediately preceding proviso)
and (ii) if all or any portion of such Net Sale Proceeds are not so used within
such 270-day period referred to in clause (i) of this proviso because such
amount is contractually committed to be used and subsequent to such date such
contract is terminated or expires without such portion being so used, such
remaining portion shall be applied on the date of such termination or expiration
as a mandatory repayment and/or commitment reduction as provided above (without
giving effect to the immediately preceding proviso). Notwithstanding the
foregoing provisions of this Section 4.02(c), so long as no Default or Event of
Default shall have occurred and be continuing, no mandatory repayments or
commitment reductions shall be required pursuant to the immediately preceding
proviso appearing in this Section 4.02(c) until the date on which the aggregate
Net Sale Proceeds from all Asset Sales not reinvested within the time periods
specified by said proviso equals or exceeds $1,000,000.
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the Effective
Date on which the Borrower or any of its Subsidiaries receives any cash proceeds
from any incurrence of Indebtedness (other than Indebtedness permitted to be
incurred pursuant to Section 9.04 as in effect on the Effective Date) or
issuance of Preferred Stock (other than (x) Disqualified Preferred Stock to the
extent the proceeds therefrom are used to effect Permitted Acquisitions, (y)
Qualified Preferred Stock and (z) Pacer Logistics Preferred Stock issued on the
Initial Borrowing Date in accordance with the requirements of Section 5.08) by
the Borrower or any of its Subsidiaries, an amount equal to the Applicable
Prepayment Percentage of the Net Cash Proceeds of the respective incurrence of
Indebtedness or issuance of Preferred Stock shall be applied as a mandatory
repayment and/or
<PAGE>
commitment reduction in accordance with the requirements of Sections 4.02(h) and
(i). Notwithstanding the foregoing provisions of this Section 4.02(d), so long
as no Default or Event of Default shall have occurred and be continuing, no
mandatory repayment or commitment reduction shall be required pursuant to this
Section 4.02(d) until the date on which the sum of (x) the Net Cash Proceeds
required to be applied as mandatory repayments and/or commitment reductions in
the absence of this sentence plus (y) the Net Cash Proceeds required to be
----
applied as mandatory repayments and/or commitment reductions pursuant to Section
4.02(e) in the absence of the last sentence of said Section, equals or exceeds
$1,000,000.
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the Effective
Date on which the Borrower or any of its Subsidiaries receives any cash proceeds
from any sale or issuance of Qualified Preferred Stock or common equity of (or
cash capital contributions to) the Borrower or any of its Subsidiaries (other
than (v) the Equity Financing, (w) issuances of Borrower Common Stock to
management of the Borrower and its Subsidiaries (including as a result of the
exercise of any options with respect thereto) in an aggregate amount not to
exceed $5,000,000 in any fiscal year of the Borrower, (x) equity contributions
to any Subsidiary of the Borrower made by the Borrower or any other Subsidiary
of the Borrower, (y) any issuance of Borrower Common Stock and Qualified
Preferred Stock to the extent the proceeds therefrom are used to effect
Permitted Acquisitions and (z) additional issuances of Borrower Common Stock and
Qualified Preferred Stock, to the extent that the aggregate proceeds excluded
pursuant to this clause (z) after the Effective Date do not exceed $5,000,000),
an amount equal to the Applicable Prepayment Percentage of the Net Cash Proceeds
of the respective equity issuance or capital contribution shall be applied as a
mandatory repayment and/or commitment reduction in accordance with the
requirements of Sections 4.02(h) and (i); provided that Net Cash Proceeds
--------
received by the Borrower from additional sales or issuances of Borrower Common
Stock shall not be required to be applied as a mandatory repayment and/or
commitment reduction on the date of receipt thereof, to the extent that (x) no
Default or Event of Default then exists and (y) the Borrower delivers a
certificate to the Administrative Agent on or prior to such date stating that
such Net Cash Proceeds shall be used or contractually committed to be used to
make Capital Expenditures and/or effect Permitted Acquisitions within 270 days
following the date of receipt of such Net Cash Proceeds (which certificate shall
set forth the estimates of the proceeds to be so expended), and provided
--------
further, that (i) if all or any portion of such Net Cash Proceeds are not so
- -------
used (or contractually committed to be used) within such 270-day period, such
remaining portion shall be applied on the last day of such period as a mandatory
repayment and/or commitment reduction as provided above (without giving effect
to the immediately preceding proviso) and (ii) if all or any portion of such Net
Cash Proceeds are not so used within such 270-day period referred to in clause
(i) above because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without such
portion being so used, such remaining portion shall be applied on the date of
such termination or expiration as a mandatory repayment and/or commitment
reduction as provided above (without giving effect to the immediately preceding
proviso). Notwithstanding the foregoing provisions of this Section 4.02(e), so
long as no Default or Event of Default shall have occurred and be continuing, no
mandatory repayment and/or commitment reduction shall be required pursuant to
this Section 4.02(e) until the date on which the sum of (x) the Net Cash
Proceeds required to be
<PAGE>
applied as mandatory repayments and/or commitment reductions in the absence of
this sentence plus (y) the Net Cash Proceeds required to be applied as mandatory
----
repayments and/or commitment reductions pursuant to Section 4.02(d) in the
absence of the last sentence in said Section, equals or exceeds $1,000,000.
(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 days following each date on
or after the Effective Date on which the Borrower or any of its Subsidiaries
receives any cash proceeds from any Recovery Event, an amount equal to 100% of
the proceeds of such Recovery Event (net of reasonable costs (including, without
limitation, legal costs and expenses) and taxes incurred in connection with such
Recovery Event and the amount of such proceeds required to be used to repay any
Indebtedness (other than Indebtedness of the Banks pursuant to this Agreement)
which is secured by the respective assets subject to such Recovery Event) shall
be applied as a mandatory repayment and/or commitment reduction in accordance
with the requirements of Sections 4.02(h) and (i), provided that (x) so long as
--------
no Default or Event of Default then exists and such proceeds do not exceed
$3,500,000, such proceeds shall not be required to be so applied on such date to
the extent that an Authorized Officer of the Borrower has delivered a
certificate to the Administrative Agent on or prior to such date stating that
such proceeds shall be used or shall be committed to be used to replace or
restore any properties or assets in respect of which such proceeds were paid
within 360 days following the date of such Recovery Event (which certificate
shall set forth the estimates of the proceeds to be so expended) and (y) so long
as no Default or Event of Default then exists and to the extent that (a) the
amount of such proceeds exceeds $3,500,000, (b) the amount of such proceeds,
together with other cash available to the Borrower and its Subsidiaries and
permitted to be spent by them on Capital Expenditures during the relevant
period, equals at least 100% of the cost of replacement or restoration of the
properties or assets in respect of which such proceeds were paid as determined
by the Borrower and as supported by such estimates or bids from contractors or
subcontractors or such other supporting information as the Administrative Agent
may reasonably accept, (c) an Authorized Officer of the Borrower has delivered
to the Administrative Agent a certificate on or prior to the date the respective
mandatory repayment and/or commitment reduction would otherwise be required
pursuant to this Section 4.02(f) in the form described in clause (x) above and
also certifying its determination as required by preceding clause (b) and
certifying the sufficiency of business interruption insurance as required by
succeeding clause (d), and (d) an Authorized Officer of the Borrower has
delivered to the Administrative Agent such evidence as the Administrative Agent
may reasonably request in form and substance reasonably satisfactory to the
Administrative Agent establishing that the Borrower has sufficient business
interruption insurance and that the Borrower will receive payment thereunder in
such amounts and at such times as are necessary to satisfy all obligations and
expenses of the Borrower (including, without limitation, all debt service
requirements, including pursuant to this Agreement), without any delay or
extension thereof, for the period from the date of the respective casualty,
condemnation or other event giving rise to the Recovery Event and continuing
through the completion of the replacement or restoration of the respective
properties or assets, then the entire amount of the proceeds of such Recovery
Event and not just the portion in excess of $3,500,000 shall be deposited with
the Administrative Agent pursuant to a cash collateral arrangement reasonably
satisfactory to the Administrative Agent whereby such proceeds shall be
disbursed to the Borrower from time to
<PAGE>
time as needed to pay or reimburse the Borrower or such Subsidiary actual costs
incurred by it in connection with the replacement or restoration of the
respective properties or assets (pursuant to such certification requirements as
may be established by the Administrative Agent), provided further, that at any
----------------
time while an Event of Default has occurred and is continuing, the Required
Banks may direct the Administrative Agent (in which case the Administrative
Agent shall, and is hereby authorized by the Borrower to, follow said
directions) to apply any or all proceeds then on deposit in such collateral
account to the repayment of Obligations hereunder in the same manner as proceeds
would be applied pursuant to the Security Agreement, and provided further, that
----------------
if all or any portion of such proceeds not required to be applied as a mandatory
repayment and/or commitment reduction pursuant to the second preceding proviso
(whether pursuant to clause (x) or (y) thereof) are either (A) not so used or
committed to be so used within 360 days after the date of the respective
Recovery Event or (B) if committed to be used within 360 days after the date of
receipt of such net proceeds and not so used within 18 months after the date of
respective Recovery Event then, in either such case, such remaining portion not
used or committed to be used in the case of preceding clause (A) and not used in
the case of preceding clause (B) shall be applied on the date occurring 360 days
after the date of the respective Recovery Event in the case of clause (A) above
or the date occurring 18 months after the date of the respective Recovery Event
in the case of clause (B) above as a mandatory repayment and/or commitment
reduction in accordance with the requirements of Sections 4.02(h) and (i).
(g) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each Excess Cash Flow Payment Date,
an amount equal to the Applicable Excess Cash Flow Percentage of the Excess Cash
Flow for the relevant Excess Cash Flow Payment Period shall be applied as a
mandatory repayment and/or commitment reduction in accordance with the
requirements of Sections 4.02(h) and (i).
(h) Each amount required to be applied pursuant to Sections 4.02(c),
(d), (e), (f) and (g) in accordance with this Section 4.02(h) shall be applied
(i) first, to repay the outstanding principal amount of Term Loans and (ii)
second, to the extent in excess of the amounts required to be applied pursuant
to preceding clause (i), to reduce the Total Revolving Loan Commitment (it being
understood and agreed that (x) the amount of any reduction to the Total
Revolving Loan Commitment as provided in immediately preceding clause (ii) shall
be deemed to be an application of proceeds for purposes of this Section 4.02(h)
even though cash is not actually applied and (y) any cash received by the
Borrower or such Subsidiary will be retained by such Person except to the extent
that such cash is otherwise required to be applied as provided in Section
4.02(a) as a result of any reduction to the Total Revolving Loan Commitment).
All repayments of outstanding Term Loans pursuant to Sections 4.02(c), (d), (e),
(f) or (g) shall be applied to reduce the then remaining Scheduled Repayments on
a pro rata basis (based upon the then remaining Scheduled Repayments after
--- ----
giving effect to all prior reductions thereto).
(i) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
provided that: (i) repayments of Eurodollar Loans pursuant to
- --------
<PAGE>
this Section 4.02 may only be made on the last day of an Interest Period
applicable thereto unless (x) all Eurodollar Loans of the respective Tranche
with Interest Periods ending on such date of required repayment and all Base
Rate Loans of the respective Tranche have been paid in full and/or (y)
concurrently with such repayment, the Borrower pays all breakage costs and other
amounts owing to each Bank pursuant to Section 1.11; (ii) if any repayment of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less
than the Minimum Borrowing Amount applicable thereto, such Borrowing shall be
converted at the end of the then current Interest Period into a Borrowing of
Base Rate Loans; and (iii) each repayment of any Tranche of Loans made pursuant
to a Borrowing shall be applied pro rata among such Tranche of Loans. In the
--- ----
absence of a designation by the Borrower as described in the preceding sentence,
the Administrative Agent shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage costs
owing under Section 1.11. Notwithstanding the foregoing provisions of this
Section 4.02, if at any time the mandatory repayment of Loans pursuant to this
Section 4.02 would result, after giving effect to the procedures set forth in
this clause (i) above, in the Borrower incurring breakage costs under Section
1.11 as a result of Eurodollar Loans being repaid other than on the last day of
an Interest Period applicable thereto (any such Eurodollar Loans, "Affected
Loans"), the Borrower may elect, by written notice to the Administrative Agent,
to have the provisions of the following sentence be applicable. At the time any
Affected Loans are otherwise required to be prepaid, the Borrower may elect to
deposit 100% (or such lesser percentage elected by the Borrower as not being
repaid) of the principal amounts that otherwise would have been paid in respect
of the Affected Loans with the Administrative Agent to be held as security for
the obligations of the Borrower hereunder pursuant to a cash collateral
agreement to be entered into in form and substance satisfactory to the
Administrative Agent, with such cash collateral to be released from such cash
collateral account (and applied to repay the principal amount of such Eurodollar
Loans) upon each occurrence thereafter of the last day of an Interest Period
applicable to Eurodollar Loans (or such earlier date or dates as shall be
requested by the Borrower), with the amount to be so released and applied on the
last day of each Interest Period to be the amount of such Eurodollar Loans to
which such Interest Period applies (or, if less, the amount remaining in such
cash collateral account).
(j) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
4.03 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agent for the ratable account of the Bank or Banks entitled
thereto not later than 12:00 Noon (New York time) on the date when due and shall
be made in U.S. Dollars in immediately available funds at the Payment Office.
Any payments under this Agreement or under any Note which are made later than
12:00 Noon (New York time) on any Business Day shall be deemed to have been made
on the next succeeding Business Day. Whenever any payment to be made hereunder
or under any Note shall be stated to be due on a day which is not a Business
Day, the
<PAGE>
due date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
------------
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed with respect to such payments by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, in the case of each Bank, except as provided in
the second succeeding sentence, any tax, including any income, branch profits,
franchise or similar tax, which in each case is imposed on or measured by the
net income, net profits or capital of such Bank pursuant to the laws of the
jurisdiction in which such Bank is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
political subdivision or taxing authority thereof or therein) and all interest,
penalties or similar liabilities with respect to such nonexcluded taxes, levies,
imposts, duties, fees, assessments or other charges (all such nonexcluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due by the Borrower under this
Agreement or under any Note, after withholding or deduction for or on account of
any Taxes, will not be less than the amount provided for herein or in such Note.
If any amounts are payable in respect of Taxes pursuant to the preceding
sentence (any such amounts, the "Gross-Up Amount"), the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for the net amount,
if any, of any taxes such Bank shall determine are incurred by such Bank (taking
into account in calculating such net amount any allowable credit, deduction or
other benefit available as a result of, or with respect to, the payment by the
Borrower to such Bank of (i) the Gross-Up Amount or (ii) any amount paid
pursuant to this sentence) that would not have been incurred in the absence of
the payment by the Borrower of (i) the Gross-Up Amount or (ii) any amount paid
pursuant to this sentence. The Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by the
Borrower. The Borrower agrees to indemnify and hold harmless each Bank, and
reimburse such Bank upon its written request, for the amount of any Taxes so
levied or imposed and paid by such Bank in respect of any payments by or on
behalf of the Borrower.
(b) Each Bank party to this Agreement on the Effective Date hereby
represents that, as of the Effective Date, all payments of principal, interest,
and fees to be made to it by the Borrower pursuant to this Agreement will be
totally exempt from withholding of United States federal tax. Each Bank that is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower
and the Administrative Agent on or prior to the Effective Date, or in the case
of a Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 1.13 or 13.04, on the date of such assignment or transfer to
such Bank, (i) two accurate and complete
<PAGE>
original signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN
(with respect to a complete exemption under an income tax treaty) (or successor
forms) certifying to such Bank's entitlement to a complete exemption from United
States withholding tax with respect to payments to be made under this Agreement
and under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under
an income tax treaty) pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio
interest exemption) (or successor form) certifying to such Bank's entitlement to
a complete exemption from United States withholding tax with respect to payments
of interest to be made under this Agreement and under any Note. In addition,
each Bank agrees that (a) from time to time after the Effective Date, when a
lapse in time or change in circumstances renders the previous certification
obsolete or inaccurate in any material respect, and (b) upon the Borrower's
reasonable request after the occurrence of any other event requiring the
delivery of a Form W-8ECI, Form W-8BEN or any successor form in addition to or
in replacement of the forms previously delivered, it will deliver to the
Borrower and the Administrative Agent two new accurate and complete original
signed copies of Internal Revenue Service Form W-8ECI, Form W-8BEN (with respect
to the benefits of any income tax treaty) , Form W-8BEN (with respect to the
portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, or any
successor form, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Bank to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify the
Borrower and the Administrative Agent of its inability to deliver any such form
or certificate in which case such Bank shall not be required to deliver any such
form or certificate pursuant to this Section 4.04(b). Notwithstanding anything
to the contrary contained in Section 4.04(a), but subject to the immediately
succeeding sentence, (x) the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes imposed
by the United States (or any political subdivision or taxing authority thereof
or therein) from interest, fees or other amounts payable hereunder for the
account of any Bank which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for federal income tax purposes to the
extent that such Bank has not provided to the Borrower U.S. Internal Revenue
Service forms that establish a complete exemption from such deduction or
withholding and (y) the Borrower shall not be obligated pursuant to Section
4.04(a) hereof to gross-up payments to be made to such Bank, or to indemnify and
hold harmless or reimburse such Bank, in respect of income or similar taxes
imposed by the United States if (I) such Bank has not provided to the Borrower
the Internal Revenue Service forms required to be provided to the Borrower
pursuant to this Section 4.04(b) or (II) in the case of a payment, other than
interest, to a Bank described in clause (ii) above, to the extent that such
forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the
Borrower agrees to pay additional amounts and to indemnify each Bank in the
manner set forth in Section 4.04(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any Taxes
deducted or withheld by it as described in the immediately preceding
<PAGE>
sentence as a result of any changes after the Effective Date in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of such Taxes.
For purposes of the immediately preceding sentence, the final U.S. Treasury
regulations that were issued October 6, 1997 and amended as of December 31, 1998
with respect to the withholding of United States Federal income tax (the "New
Withholding Regulations") shall not be considered to constitute a change after
the Effective Date, or otherwise, in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of Taxes, notwithstanding that the New
Withholding Regulations generally are only effective for payments made after
December 31, 1999. The Borrower shall not be required to pay any additional
amounts or indemnification under Section 4.04(a) to any Bank to the extent that
the obligation to pay such additional amounts or indemnification would not have
arisen but for the representation set forth in the first sentence of Section
4.04(b) above made by the Bank not being true.
(c) If the Borrower pays any additional amount under this Section
4.04 with respect to taxes imposed on any payments made to or on behalf of a
Bank and such Bank determines in its sole discretion that it has actually
received or realized in connection therewith any refund of tax, or any reduction
of, or credit against, its tax liabilities (a "Tax Benefit"), such Bank shall
pay to the Borrower an amount that the Bank shall, in its sole discretion,
determine is equal to the net benefit, after tax, which was obtained by the Bank
as a consequence of such refund, reduction or credit; provided, however, that
-------- -------
(i) any Bank may determine, in its sole discretion consistent with the policies
of such Bank, whether to seek a Tax Benefit and (ii) nothing in this Section
4.04(c) shall require the Bank to disclose any confidential information to the
Borrower (including, without limitation, its tax returns).
(d) Each Bank shall use reasonable efforts (consistent with legal and
regulatory restrictions and subject to overall policy considerations of such
Bank) (i) to file any certificate or document or to furnish any information as
reasonably requested by the Borrower pursuant to any applicable treaty, law or
regulation or (ii) to designate a different applicable lending office of such
Bank, if the making of such filing or the furnishing of such information or the
designation of such other lending office would avoid the need for or reduce the
amount of any additional amounts payable by the Borrower and would not, in the
sole discretion of such Bank, be disadvantageous to such Bank.
(e) The provisions of this Section 4.04 are subject to the provisions
of Section 13.18 (to the extent applicable).
SECTION 5. Conditions Precedent to Initial Credit Events. The
---------------------------------------------
obligation of each Bank to make each Loan hereunder, and the obligation of the
Letter of Credit Issuer to issue each Letter of Credit hereunder, in each case
on the Initial Borrowing Date, is subject at the time of the making of such Loan
or the issuance of such Letter of Credit, as the case may be, to the
satisfaction of the following conditions:
<PAGE>
5.01 Execution of Agreement; Notes. On or prior to the Initial
-----------------------------
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each Bank
requesting same the appropriate Term Note and/or Revolving Note and to BTCo, if
so requested, the Swingline Note, in each case executed by the Borrower and in
the amount, maturity and as otherwise provided herein.
5.02 Officer's Certificate. On the Initial Borrowing Date, the
---------------------
Administrative Agent shall have received a certificate dated such date signed by
an appropriate officer of the Borrower stating that all of the applicable
conditions set forth in Sections 5.05 through 5.09, inclusive, and 6.01 (other
than such conditions that are subject to the satisfaction of the Agents and/or
the Required Banks), have been satisfied on such date.
5.03 Opinions of Counsel. On the Initial Borrowing Date, the
-------------------
Administrative Agent shall have received opinions, addressed to each Agent, the
Collateral Agent and each of the Banks and dated the Initial Borrowing Date,
from (i) Dewey Ballantine LLP, special New York counsel to the Credit Parties,
which opinion shall cover the matters contained in Exhibit E-1 and such other
matters incident to the transactions contemplated herein as the Agents and the
Required Banks may reasonably request and be in form and substance reasonably
satisfactory to the Agents and the Required Banks, (ii) Waller Lansden Dortch &
Davis, special Tennessee counsel to the Credit Parties, which opinion shall
cover the matters contained in Exhibit E-2 and such other matters incident to
the transactions contemplated herein as the Agents and the Required Banks may
reasonably request and be in form and substance reasonably satisfactory to the
Agents and the Required Banks, (iii) counsel rendering such opinions, reliance
letters addressed to each Agent and each of the Banks and dated the Initial
Borrowing Date with respect to all legal opinions delivered in connection with
the Transaction, which opinions shall cover such matters as the Agents may
reasonably request and be in form and substance reasonably satisfactory to the
Agents and (iv) local counsel to the Credit Parties and/or the Agents reasonably
satisfactory to the Agents, which opinions (x) shall be addressed to each Agent,
the Collateral Agent and each of the Banks and be dated the Initial Borrowing
Date, (y) shall cover the perfection of the security interests granted pursuant
to the Security Documents and such other matters incident to the transactions
contemplated herein as the Agents may reasonably request and (z) shall be in
form and substance reasonably satisfactory to the Agents.
5.04 Company Documents; Proceedings. (a) On the Initial Borrowing
------------------------------
Date, the Administrative Agent shall have received from the Borrower and each
other Credit Party a certificate, dated the Initial Borrowing Date, signed by
the chairman, a vice-chairman, the president or any vice-president of such
Credit Party, and attested to by the secretary or any assistant secretary of
such Credit Party, in the form of Exhibit F with appropriate insertions,
together with copies of the certificate of incorporation, by-laws or equivalent
organizational documents of such Credit Party and the resolutions of such Credit
Party referred to in such certificate and all of the foregoing (including each
such certificate of incorporation, by-laws or other organizational document)
shall be reasonably satisfactory to the Agents.
(b) On the Initial Borrowing Date, all Company and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement
<PAGE>
and the other Documents shall be reasonably satisfactory in form and substance
to the Agents, and the Administrative Agent shall have received all information
and copies of all certificates, documents and papers, including good standing
certificates, bring-down certificates and any other records of Company
proceedings and governmental approvals, if any, which any Agent reasonably may
have requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper Company or governmental authorities.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the capital structure (including, without limitation, the terms of
any capital stock, options, warrants or other securities issued by the Borrower
or any of its Subsidiaries), and management of the Borrower and its Subsidiaries
shall be in form and substance satisfactory to the Agents.
5.05 Adverse Change, etc. (a) On the Initial Borrowing Date, since
--------------------
December 31, 1998, nothing shall have occurred which (i) the Required Banks or
any Agent shall reasonably determine has had, or could reasonably be expected to
have, a material adverse effect on the rights or remedies of the Banks or the
Agents, or on the ability of any Credit Party to perform its obligations to them
hereunder or under any other Credit Document or (ii) has had a material adverse
effect on the Transaction or a Material Adverse Effect.
(b) On the Initial Borrowing Date, there shall not have occurred and
be continuing any material adverse change to the syndication market for credit
facilities similar in nature to this Agreement and there shall not have occurred
and be continuing a material disruption or a material adverse change in
financial, banking or capital markets that would have a material adverse effect
on the syndication, in each case as determined by the Agents in their reasonable
discretion.
5.06 Litigation. On the Initial Borrowing Date, there shall be no
----------
actions, suits, proceedings or investigations pending or threatened (a) with
respect to this Agreement or any other Document or the Transaction, (b) with
respect to any Existing Indebtedness, (c) which could reasonably be expected to
have a Material Adverse Effect or (d) which any Agent or the Required Banks
shall determine could reasonably be expected to have (i) a Material Adverse
Effect or (ii) a material adverse effect on the Transaction, the rights or
remedies of the Banks or the Agents hereunder or under any other Credit Document
or on the ability of any Credit Party to perform its respective obligations to
the Banks or the Agents hereunder or under any other Credit Document.
5.07 Approvals. On the Initial Borrowing Date, (i) all necessary
---------
governmental (domestic and foreign), regulatory and third party approvals in
connection with any Existing Indebtedness, the Transaction, the transactions
contemplated by the Documents and otherwise referred to herein or therein shall
have been obtained and remain in full force and effect and evidence thereof
shall have been provided to the Administrative Agent, and (ii) all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains, prevents or imposes materially adverse
conditions upon the consummation of the Transaction, the making of the Loans and
the transactions contemplated by the Documents or otherwise referred to herein
or therein. Additionally, there shall not exist any judgment, order,
<PAGE>
injunction or other restraint issued or filed or a hearing seeking injunctive
relief or other restraint pending or notified prohibiting or imposing materially
adverse conditions upon, or materially delaying, or making economically
unfeasible, the consummation of the Transaction or the making of the Loans.
5.08 Consummation of the Recapitalization; Equity Financing, etc.
------------------------------------------------------------
(a) On the Initial Borrowing Date, Acquisition Corp., APL and the Borrower
shall have effected the Recapitalization (i) pursuant to which Acquisition Corp.
shall have acquired all of the capital stock (other than the equity subject to
the LTS Equity Rollover) of the Borrower pursuant to, and in accordance with the
terms of, the Stock Purchase Agreement (the "Acquisition") and (ii) as a result
of which (immediately after giving effect thereto) (x) Acquisition Corp. shall
own approximately 93% of the issued and outstanding shares of Borrower Common
Stock, (y) APL shall retain shares of Borrower Common Stock with a value of
approximately $7,500,000 (the "LTS Equity Rollover"), representing approximately
7.0% of the issued and outstanding shares of Borrower Common Stock, and (z) cash
in an aggregate amount not to exceed $300,000,000 shall have been distributed to
APL (other than in respect to equity being retained pursuant to the LTS Equity
Rollover) (the "Recap Distribution"). Concurrently with the consummation of the
Recapitalization, the Borrower shall have caused an amendment to its Certificate
of Incorporation to be filed with the Secretary of State of the State of
Tennessee, which amendment shall change the name of the Borrower to "Pacer
International, Inc."
(b) On the Initial Borrowing Date and immediately after giving effect
to the Recapitalization, (i) the Borrower shall have acquired all of the capital
stock (other than the equity subject to the Pacer Logistics Equity Rollover) of
Pacer Logistics, by way of a one-step merger of Pacer Logistics Acquisition
Corp. with and into Pacer Logistics, with Pacer Logistics as the surviving
corporation of such merger, pursuant to, and in accordance with the terms of the
Pacer Logistics Acquisition Documents, for aggregate cash consideration equal to
approximately $72.0 million (the "Pacer Logistics Acquisition") and (ii) Pacer
Logistics shall have issued 24,333.94 shares of 7.5% Series B Perpetual
Participating Exchangeable Preferred Stock, par value $.01 per share, with an
aggregate liquidation preference of $24,333,940 (the "Pacer Logistics Preferred
Stock") to certain existing managers of Pacer Logistics in exchange for existing
Preferred Stock of Pacer Logistics held by them with a like aggregate
liquidation preference (the "Pacer Logistics Equity Rollover").
(c) On the Initial Borrowing Date, (i) Acquisition Corp. shall have
received cash proceeds in an amount equal to at least $96,000,000 from the
issuance of common stock of Acquisition Corp. to Apollo Investment Fund IV, L.P.
(the "Apollo Equity Financing" and, together with the LTS Equity Rollover and
the Pacer Logistics Equity Rollover, the "Equity Financing") and shall have
utilized the full amount of such cash proceeds to make payments owing in
connection with the Transaction prior to utilizing any proceeds of Loans for
such purpose and (ii) the Borrower shall have received gross cash proceeds in
the aggregate amount of (x) $150,000,000 from the issuance of the Senior
Subordinated Notes and (y) $40,000,000 from the sale of certain assets by the
Borrower that will be leased-back from the purchaser thereof (the "Sale-
Leaseback Transaction") and shall have utilized the full amount of such cash
proceeds to
<PAGE>
make payments owing in connection with the Transaction prior to utilizing any
proceeds of Loans for such purpose.
(d) On the Initial Borrowing Date, (i) the Administrative Agent shall
have received true and correct copies of all Recapitalization Documents, Senior
Subordinated Notes Documents, Sale-Leaseback Transaction Documents, Equity
Financing Documents and Pacer Logistics Acquisition Documents, certified as such
by appropriate officer of the Borrower, (ii) all such Documents, and all terms
and conditions thereof (including, without limitation, in the case of the Senior
Subordinated Notes Documents and the Equity Financing Documents, amortization,
maturities, interest rates, dividend rates, limitation on cash dividends
payable, covenants, defaults, remedies, sinking fund provisions, conversion
features and subordination provisions), shall be in form and substance
reasonably satisfactory to each Agent and the Required Banks and (iii) all such
Documents shall be in full force and effect. All conditions precedent to the
consummation of the Transaction as set forth in the Recapitalization Documents,
the Senior Subordinated Notes Documents, the Sale-Leaseback Transaction
Documents, the Equity Financing Documents and the Pacer Logistics Acquisition
Documents shall have been satisfied, and not waived unless consented to by each
Agent and the Required Banks, to the reasonable satisfaction of each Agent and
the Required Banks. Each of the Recapitalization, the issuance of the Senior
Subordinated Notes, the Sale-Leaseback Transaction, the Equity Financing and the
Pacer Logistics Acquisition shall have been consummated in accordance with the
terms and conditions of the applicable Documents and all applicable law.
5.09 Refinancing. (a) On the Initial Borrowing Date (after having
-----------
given effect to the Recapitalization and the Pacer Logistics Acquisition) and
concurrently with the incurrence of Loans on such date, (i) approximately
$58,600,000 of Indebtedness of the Borrower and its Subsidiaries (including
Pacer Logistics) shall have been repaid in full, together with all fees and
other amounts owing thereon (the "Refinanced Indebtedness"), all commitments
under the documents evidencing Refinanced Indebtedness shall have been
terminated and all letters of credit issued pursuant to the documents evidencing
the Refinanced Indebtedness shall have been terminated, incorporated hereunder
as Letters of Credit as contemplated by Section 2.01(e) or supported by a back-
stop Letter of Credit issued hereunder, (ii) 350,000 shares of outstanding
Preferred Stock of Pacer Logistics, par value $.01 per share, with an aggregate
liquidation preference equal to $3,528,000 shall have been redeemed in full, and
(iii) the Borrower shall have made cash payments not to exceed $500,000 to
satisfy earn-out obligations owing in connection with acquisitions consummated
by Pacer Logistics and its Subsidiaries prior to the Initial Borrowing Date.
(b) On the Initial Borrowing Date and concurrently with the
incurrence of Loans on such date, all security interests in respect of, and
Liens securing, the Refinanced Indebtedness shall have been terminated and
released, and the Administrative Agent shall have received all such releases as
may have been requested by the Administrative Agent, which releases shall be in
form and substance satisfactory to the Agents and the Required Banks. Without
limiting the foregoing, there shall have been delivered to the Administrative
Agent (x) proper termination statements (Form UCC-3 or the appropriate
equivalent) for filing under the UCC of each jurisdiction where a financing
statement (Form UCC-1 or the appropriate
<PAGE>
equivalent) was filed with respect to the Borrower or any of its Subsidiaries in
connection with the security interests created with respect to the Refinanced
Indebtedness and the documentation related thereto, (y) terminations or
reassignments of any security interest in, or Lien on, any patents, trademarks,
copyrights, or similar interests of the Borrower or any of its Subsidiaries on
which filings have been made and (z) terminations of all mortgages, leasehold
mortgages and deeds of trust created with respect to property of the Borrower or
any of its Subsidiaries, in each case, to secure the obligations under the
Refinanced Indebtedness, all of which shall be in form and substance
satisfactory to the Agents and the Required Banks.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the Borrower and its Subsidiaries shall have no Indebtedness or
Preferred Stock outstanding other than (i) the Loans, (ii) the Senior
Subordinated Notes, (iii) certain other indebtedness existing on the Initial
Borrowing Date as listed on Schedule IV in an aggregate outstanding principal
amount not to exceed $400,000 (with the Indebtedness described in this sub-
clause (iii) being herein called the "Existing Indebtedness") and (iv) 24,333.94
shares of Pacer Logistics Preferred Stock. On and as of the Initial Borrowing
Date, all of the Existing Indebtedness shall remain outstanding after giving
effect to the Transaction and the other transactions contemplated hereby without
any default or event of default existing thereunder or arising as a result of
the Transaction and the other transactions contemplated hereby (except to the
extent amended or waived by the parties thereto on terms and conditions
satisfactory to the Agents and the Required Banks), and there shall not be any
amendments or modifications to the Existing Indebtedness Agreements other than
as requested or approved by the Agents or the Required Banks.
(d) The Administrative Agent shall have received evidence in form,
scope and substance reasonably satisfactory to the Agents and the Required Banks
that the matters set forth in this Section 5.09 have been satisfied on the
Initial Borrowing Date.
5.10 Security Documents; etc. (a) On the Initial Borrowing Date,
------------------------
each of the Credit Parties shall have duly authorized, executed and delivered a
Pledge Agreement in the form of Exhibit G (as amended, restated, modified and/or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Pledge Agreement") and shall have delivered to the Collateral Agent, as
pledgee thereunder, all of the Pledged Securities referred to therein then owned
by such Credit Parties and required to be pledged pursuant to the terms thereof,
endorsed in blank in the case of promissory notes or accompanied by executed and
undated stock powers in the case of capital stock, along with evidence that all
other actions necessary or, in the reasonable opinion of the Collateral Agent,
desirable, to perfect the security interests purported to be created by the
Pledge Agreement have been taken, and the Pledge Agreement shall be in full
force and effect.
(b) On the Initial Borrowing Date, each of the Credit Parties shall
have duly authorized, executed and delivered a Security Agreement in the form of
Exhibit H (as amended, restated, modified and/or supplemented from time to time
in accordance with the terms thereof and hereof, the "Security Agreement")
covering all of the Security Agreement Collateral, together with:
<PAGE>
(i) executed copies of financing statements (Form UCC-1 and PPSA
Form 1-C) or appropriate local equivalent in appropriate form for filing
under the UCC, the PPSA or appropriate local equivalent of each
jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported to
be created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all effective
financing statements that name the Borrower or any of its Subsidiaries as
debtor and that are filed in the jurisdictions referred to in clause (i)
above, together with copies of such financing statements (none of which
shall cover the Collateral except (x) those with respect to which
appropriate termination statements executed by the secured lender
thereunder have been delivered to the Administrative Agent and (y) to the
extent evidencing Permitted Liens);
(iii) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable, to perfect the
security interests purported to be created by the Security Agreement; and
(iv) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable, to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement shall be in full force and effect.
5.11 Subsidiaries Guaranty. On the Initial Borrowing Date, each
---------------------
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiaries Guaranty in the form of Exhibit I (as amended, restated, modified
and/or supplemented from time to time in accordance with the terms thereof and
hereof, the "Subsidiaries Guaranty"), and the Subsidiaries Guaranty shall be in
full force and effect.
5.12 Employee Benefit Plans; Shareholders' Agreements; Management
------------------------------------------------------------
Agreements; Employment Agreements; Collective Bargaining Agreements; Existing
- -----------------------------------------------------------------------------
Indebtedness Agreements; Material Contracts; Tax Allocation Agreements. On or
- ----------------------------------------------------------------------
prior to the Initial Borrowing Date, there shall have been delivered to the
Administrative Agent true and correct copies, certified as true and complete by
an appropriate officer of the Borrower of the following documents, in each case
as same will be in effect on the Initial Borrowing Date after the consummation
of the Transaction:
(i) all Plans (and for each Plan that is required to file an annual
report on Internal Revenue Service Form 5500-series, a copy of the most
recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan
that is a "single-employer plan," as defined in Section 4001(a)(15) of
ERISA, the most recently prepared actuarial valuation therefor) and any
other "employee benefit plans," as defined in Section 3(3) of ERISA, and
any other material agreements,
<PAGE>
plans or arrangements, with or for the benefit of current or former
employees of the Borrower or any of its Subsidiaries or any ERISA Affiliate
(provided that the foregoing shall apply in the case of any Multiemployer
Plan, only to the extent that any document described therein is in the
possession of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate) (collectively, the "Employee Benefit Plans");
(ii) all agreements (including, without limitation, shareholders'
agreements, subscription agreements and registration rights agreements)
entered into by the Borrower or any of its Subsidiaries governing the terms
and relative rights of its capital stock and any agreements entered into by
shareholders relating to any such entity with respect to its capital stock
(collectively, the "Shareholders' Agreements");
(iii) all material agreements with members of, or with respect to,
the management of the Borrower or any of its Subsidiaries after giving
effect to the Transaction (collectively, the "Management Agreements");
(iv) any material employment agreements entered into by the Borrower
or any of its Subsidiaries after giving effect to the Transaction
(collectively, the "Employment Agreements");
(v) all collective bargaining agreements applying or relating to
any employee of the Borrower or any of its Subsidiaries after giving effect
to the Transaction (collectively, the "Collective Bargaining Agreements");
(vi) all agreements evidencing or relating to Existing Indebtedness
of the Borrower or any of its Subsidiaries after giving effect to the
Refinancing (collectively, the "Existing Indebtedness Agreements");
(vii) all other material contracts and licenses (other than
certificates of need) of the Borrower and any of its Subsidiaries after
giving effect to the Transaction (collectively, the "Material Contracts");
and
(viii) any tax sharing or tax allocation agreements entered into by
the Borrower or any of its Subsidiaries (collectively, the "Tax Allocation
Agreements");
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Employment Agreements, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Material Contracts and Tax Allocation Agreements shall
be in form and substance satisfactory to the Agents and the Required Banks and
shall be in full force and effect on the Initial Borrowing Date.
5.13 Consent Letter. On the Initial Borrowing Date, the
--------------
Administrative Agent shall have received a letter from CT Corporation System,
presently located at 1633 Broadway, New York, New York 10019, substantially in
the form of Exhibit J, indicating its consent to its appointment by the Borrower
as its agent to receive service of process as specified in Section 13.08.
<PAGE>
5.14 Solvency Certificate; Insurance Certificates. On or before the
--------------------------------------------
Initial Borrowing Date, the Administrative Agent shall have received:
(a) a solvency certificate in the form of Exhibit K from the chief
financial officer of the Borrower, dated the Initial Borrowing Date, and
supporting the conclusion that, after giving effect to the Transaction and
the incurrence of all financings contemplated herein, the Borrower (on a
stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated
basis), in each case, are not insolvent and will not be rendered insolvent
by the indebtedness incurred in connection herewith, will not be left with
unreasonably small capital with which to engage in its or their respective
businesses and will not have incurred debts beyond its or their ability to
pay such debts as they mature and become due; and
(b) evidence of insurance complying with the requirements of Section
8.03 for the business and properties of the Borrower and its Subsidiaries,
in scope, form and substance reasonably satisfactory to the Agents and the
Required Banks and naming the Collateral Agent as an additional insured
and/or loss payee, and stating that such insurance shall not be canceled or
revised without at least 30 days' prior written notice by the insurer to
the Collateral Agent.
5.15. Financial Statements; Projections. (a) On or prior to the
---------------------------------
Initial Borrowing Date, there shall have been delivered to the Administrative
Agent (i) true and correct copies of the financial statements referred to in
Section 7.10(b) and (ii) an unaudited pro forma consolidated balance sheet of
--- -----
the Borrower and its Subsidiaries as of April 2, 1999 and, after giving effect
to the Transaction and the incurrence of all Indebtedness (including the Loans
and the Senior Subordinated Notes) contemplated herein (the "Pro Forma Balance
--- -----
Sheet"), together with a related funds flow statement, which financial
statements, Pro Forma Balance Sheet and funds flow statement shall be reasonably
--- -----
satisfactory to the Agents and the Required Banks.
(b) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Administrative Agent detailed projected consolidated financial
statements of the Borrower and its Subsidiaries certified by the chief financial
officer or the chief operating officer of the Borrower for the five fiscal years
ended after the Initial Borrowing Date (the "Projections"), which Projections
(x) shall reflect the forecasted consolidated financial conditions and income
and expenses of the Borrower and its Subsidiaries after giving effect to the
Transaction and the related financing thereof and the other transactions
contemplated hereby and (y) shall be reasonably satisfactory in form and
substance to the Agents and the Required Banks.
5.16 Payment of Fees. On the Initial Borrowing Date, all costs, fees
----------------
and expenses, and all other compensation due to the Agents or the Banks
(including, without limitation, legal fees and expenses) shall have been paid to
the extent due.
SECTION 6. Conditions Precedent to All Credit Events. The obligation
-----------------------------------------
of each Bank to make Loans (including Loans made on the Initial Borrowing Date
but excluding Mandatory Borrowings made thereafter, which shall be made as
provided in Section 1.01(d)), and the obligation of a Letter of Credit Issuer to
issue any Letter of Credit, is subject, at the time
<PAGE>
of each such Credit Event (except as hereinafter indicated), to the satisfaction
of the following conditions:
6.01 No Default; Representations and Warranties. At the time of each
------------------------------------------
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit Document shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of such Credit Event (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to
---------------------------------------------
the making of each Loan (excluding Swingline Loans and Mandatory Borrowings),
the Administrative Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.03(a). Prior to the making of any Swingline Loan,
BTCo shall have received the notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Letter of Credit Issuer shall have
received a Letter of Credit Request meeting the requirements of Section 2.02(a).
The occurrence of the Initial Borrowing Date and the acceptance of the
benefits or proceeds of each Credit Event shall constitute a representation and
warranty by the Borrower to each Agent and each of the Banks that all the
conditions specified in Section 5 and in this Section 6 and applicable to such
Credit Event (other than such conditions that are subject to the satisfaction of
the Agents and/or the Required Banks) exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Administrative Agent at the Notice Office for the account of each of the
Banks and, except for the Notes, in sufficient counterparts or copies for each
of the Banks and shall be in form and substance satisfactory to the Banks.
SECTION 7. Representations and Warranties. In order to induce the
------------------------------
Banks to enter into this Agreement and to make the Loans and issue and/or
participate in the Letters of Credit provided for herein, the Borrower makes the
following representations and warranties to the Banks, in each case after giving
effect to the Transaction, all of which shall survive the execution and delivery
of this Agreement, the making of the Loans and the issuance of the Letters of
Credit (with the occurrence of the Initial Borrowing Date and each Credit Event
on and after the Initial Borrowing Date being deemed to constitute a
representation and warranty by the Borrower that the matters specified in this
Section 7 are true and correct in all material respects on and as of the Initial
Borrowing Date and the date of each such Credit Event, unless stated to relate
to a specific earlier date in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date):
<PAGE>
7.01 Company Status. Each of the Borrower and each of its
--------------
Subsidiaries (i) is a duly organized and validly existing Company in good
standing under the laws of the jurisdiction of its organization, (ii) has the
Company power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (iii) is
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified would have a Material Adverse Effect.
7.02 Company Power and Authority. Each Credit Party has the Company
---------------------------
power and authority to execute, deliver and carry out the terms and provisions
of the Documents to which it is a party and has taken all necessary Company
action to authorize the execution, delivery and performance of the Documents to
which it is a party. Each Credit Party has duly executed and delivered each
Document to which it is a party and each such Document constitutes the legal,
valid and binding obligation of such Credit Party enforceable in accordance with
its terms, except to the extent that the enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
7.03 No Violation. Neither the execution, delivery or performance by
------------
any Credit Party of the Documents to which it is a party, nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will contravene any material
provision of any applicable law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
(other than pursuant to the Security Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of the
property or assets of such Credit Party or any of its Subsidiaries pursuant to
the terms of any indenture, mortgage, deed of trust, loan agreement, credit
agreement or any other material agreement or instrument to which such Credit
Party or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which such Credit Party and any of its
Subsidiaries may be subject (including, without limitation, the Existing
Indebtedness Agreements and the Senior Subordinated Notes Indenture) or (iii)
will violate any provision of the certificate of incorporation, by-laws,
certificate of partnership, partnership agreement, certificate of limited
liability company, limited liability company agreement or equivalent
organizational document, as the case may be, of such Credit Party or any of its
Subsidiaries.
7.04 Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the best knowledge of the Borrower, threatened (i)
with respect to any Credit Document, (ii) with respect to the Transaction or any
other Document, or (iii) with respect to the Borrower or any of its Subsidiaries
(x) that could reasonably be expected to have a Material Adverse Effect or (y)
that could reasonably be expected to have a material adverse effect on the
rights or remedies of the Agents or the Banks or on the ability of any Credit
Party to perform its respective obligations to the Agents or the Banks hereunder
and under the other Credit Documents to which it is, or will be, a party.
Additionally, there does not exist any judgment,
<PAGE>
order or injunction prohibiting or imposing material adverse conditions upon the
occurrence of any Credit Event.
7.05 Use of Proceeds; Margin Regulations. (a) The proceeds of the
-----------------------------------
Term Loans shall be utilized by the Borrower on the Initial Borrowing Date
solely to (x) finance the Recapitalization, the Refinancing and the Pacer
Logistics Acquisition and (y) pay fees and expenses (not to exceed $24.3
million) incurred in connection with the Transaction.
(b) The proceeds of all Revolving Loans and Swingline Loans shall
be utilized by the Borrower for the general corporate and working capital
purposes of the Borrower and its Subsidiaries (including, but not limited to,
Permitted Acquisitions but excluding payments in connection with the
Transaction).
(c) Neither the making of any Loan, nor the use of the proceeds
thereof, nor the occurrence of any other Credit Event, will violate or be
inconsistent with the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System and no part of any Credit Event (or the
proceeds thereof) will be used to purchase or carry any Margin Stock or to
extend credit for the purpose of purchasing or carrying any Margin Stock.
7.06 Governmental Approvals. Except as may have been obtained or
----------------------
made on or prior to the Initial Borrowing Date (and which remain in full force
and effect on the Initial Borrowing Date), no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Document.
7.07 Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7.08 Public Utility Holding Company Act. Neither the Borrower nor
----------------------------------
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
7.09 True and Complete Disclosure. All factual information (taken as
----------------------------
a whole) heretofore or contemporaneously furnished by or on behalf of the
Borrower or any of its Subsidiaries in writing to any Agent or any Bank
(including, without limitation, all information contained in the Documents) for
purposes of or in connection with this Agreement or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any such Persons in writing to any Agent
or any Bank will be, true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided, it being understood and agreed that for purposes of
<PAGE>
this Section 7.09, such factual information shall not include the Projections or
any pro forma financial information.
--- -----
7.10 Financial Condition; Financial Statements. (a) On and as of
-----------------------------------------
the Initial Borrowing Date, on a pro forma basis after giving effect to the
--- -----
Transaction and to all Indebtedness (including the Loans and the Senior
Subordinated Notes) incurred, and to be incurred, and Liens created, and to be
created, by each Credit Party in connection therewith, with respect to the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis), (x) the sum of the assets, at a fair valuation, of the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis) will exceed its or their debts, (y) it has or they have not
incurred nor intended to, nor believes or believe that it or they will, incur
debts beyond its or their ability to pay such debts as such debts mature and (z)
it or they will have sufficient capital with which to conduct its or their
business. For purposes of this Section 7.10, "debt" means any liability on a
claim, and "claim" means (i) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
(b) (I) (i) The audited statements of assets, liabilities and
divisional control account of American President Lines Stacktrain Services (a
division of Land Transport Services, Inc.) as of December 27, 1996, December 26,
1997 and December 25, 1998 for the fiscal years ended as of said dates, (ii) the
audited statements of operations and cash flows of American President Lines
Stacktrain Services for the fiscal year ended December 27, 1996, the period
commencing December 28, 1996 and ending November 12, 1997, the period commencing
November 13, 1997 and ending December 26, 1997 and the fiscal year ended
December 25, 1998, (iii) the unaudited statements of assets, liabilities and
divisional control account of American President Lines Stacktrain Services as of
December 25, 1998 and April 2, 1999 for the fiscal year or three-month period,
as the case may be, ended as of said dates, (iv) the unaudited statements of
operations and cash flows of American President Lines Stacktrain Services for
the three-month periods ended April 3, 1998 and April 2, 1999 and (v) the Pro
---
Forma Balance Sheet, in each case furnished to each Bank prior to the Initial
- -----
Borrowing Date pursuant to Section 5.15(a), present fairly in all material
respects the consolidated financial condition of the Borrower at the dates of
said financial statements and the results for the periods covered thereby (or,
in the case of the Pro Forma Balance Sheet, presents a good faith estimate of
--- -----
the consolidated pro forma financial condition of the Borrower (after giving
--- -----
effect to the Transaction at the date thereof)), subject, in the case of
unaudited financial statements, to normal year-end adjustments. All such
financial statements (other than the aforesaid Pro Forma Balance Sheet) have
--- -----
been prepared in accordance with GAAP consistently applied except to the extent
provided in the notes to said financial statements and subject, in the case of
the three-month statements, to
<PAGE>
normal year-end audit adjustments (all of which are of a recurring nature and
none of which, individually or in the aggregate, would be material) and the
absence of footnotes.
(II) (i) The audited consolidated balance sheets of Pacer Logistics
and its Subsidiaries at March 31, 1997, December 31, 1997 and December 31, 1998
for the three-month period or fiscal years ended, as the case may be, as of said
dates (ii) the audited statements of operations, cash flows and changes in
shareholders' equity of Pacer Logistics for the fiscal year ended December 31,
1996, the period commencing January 1, 1997 and ending March 31, 1997, the
period commencing March 31, 1997 and ending December 31, 1997 and the fiscal
year ended December 31, 1998, (iii) the unaudited consolidated balance sheets of
Pacer Logistics and its Subsidiaries at December 31, 1998 and March 31, 1999 for
the fiscal year or three-month period, as the case may be, ended as of said
dates and (iv) the unaudited statements of operations and cash flows for the
three-month periods ended March 31, 1998 and March 31, 1999, in each case
furnished to each Bank prior to the Initial Borrowing Date pursuant to Section
5.15(a), present fairly in all material respects the consolidated financial
condition of Pacer Logistics at the dates of said financial statements and the
results for the periods covered thereby, subject, in the case of unaudited
financial statements, to normal year-end adjustments. All such financial
statements have been prepared in accordance with GAAP consistently applied
except to the extent provided in the notes to said financial statements and
subject, in the case of the three-month statements, to normal year-end audit
adjustments (all of which are of a recurring nature and none of which,
individually or in the aggregate, would be material) and the absence of
footnotes.
(c) Since December 31, 1998 (but after giving effect to the
Transaction as if same had occurred prior thereto), nothing has occurred that
has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 7.10(b) and the Indebtedness incurred under this Agreement and the
Senior Subordinated Notes (i) as of the Initial Borrowing Date (and after giving
effect to any Loans made on such date), there were no liabilities or obligations
(excluding current obligations incurred in the ordinary course of business) with
respect to the Borrower or any of its Subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in the aggregate, could reasonably be expected to
be material to the Borrower and its Subsidiaries taken as a whole and (ii) the
Borrower does not know of any basis for the assertion against it or any of its
Subsidiaries of any such liability or obligation which, either individually or
in the aggregate, are or would be reasonably likely to have, a Material Adverse
Effect.
(e) The Projections have been prepared on a basis consistent with the
financial statements referred to in Section 7.10(b), and have been prepared in
good faith and are based on reasonable assumptions under the then known facts
and circumstances. On the Initial Borrowing Date, the management of the
Borrower believes that the Projections are reasonable and attainable based upon
the then known facts and circumstances (it being understood that nothing
contained in this Section 7.10(e) shall constitute a representation that the
results forecasted in such Projections will in fact be achieved). There is no
fact known to the Borrower or any of its
<PAGE>
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Banks for use in connection with
the transactions contemplated hereby.
7.11 Security Interests. On and after the Initial Borrowing Date,
------------------
each of the Security Documents creates (or after the execution and delivery
thereof will create), as security for the Obligations, a valid and enforceable
perfected security interest in and Lien on all of the Collateral subject
thereto, superior to and prior to the rights of all third Persons, and subject
to no other Liens (except that (i) the Security Agreement Collateral may be
subject to Permitted Liens relating thereto and (ii) the Pledge Agreement
Collateral may be subject to the Liens described in clauses (a) and (e) of
Section 9.03), in favor of the Collateral Agent. No filings or recordings are
required in order to perfect and/or render enforceable as against third parties
the security interests created under any Security Document except for filings or
recordings required in connection with any such Security Document which shall
have been made on or prior to the Initial Borrowing Date as contemplated by
Section 5.10 or on or prior to the execution and delivery thereof as
contemplated by Sections 8.11, 8.12 and 9.15.
7.12 Compliance with ERISA. (a) Part A of Schedule V sets forth
---------------------
each Plan and each Multiemployer Plan; except as set forth in Part B of Schedule
V, each Plan (and each related trust, insurance contract or fund) is in
substantial compliance with its terms and with all applicable laws, including
without limitation ERISA and the Code; except as set forth in Part C of Schedule
V, each Plan (and each related trust, if any) which is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of
Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; to the
best knowledge of the Borrower after due inquiry, no Multiemployer Plan is
insolvent or in reorganization; no Plan has an Unfunded Current Liability; no
Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an
accumulated funding deficiency, within the meaning of such sections of the Code
or ERISA, or has applied for or received a waiver of an accumulated funding
deficiency or an extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA; all contributions
required to be made with respect to a Plan, a Multiemployer Plan and a Foreign
Pension Plan have been timely made by the Borrower and each Subsidiary of the
Borrower; neither the Borrower nor any Subsidiary of the Borrower has incurred
any material liability (including any indirect, contingent or secondary
liability) to or on account of a Plan pursuant to Section 409, 502(i) or 502(l)
of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any
such liability under any of the foregoing sections with respect to any Plan;
neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate
has incurred any material liability (including any indirect, contingent or
secondary liability) to or on account of a Plan pursuant to Section 4062, 4063,
4064 or 4069 of ERISA or Section 401(a)(29) or 4971 of the Code or expects to
incur any such liability under any of the foregoing sections with respect to any
Plan; to the knowledge of the Borrower and its Subsidiaries, neither the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred
any material liability (including any indirect, contingent or secondary
liability) to or on account of a Multiemployer Plan pursuant to Section 515,
4201, 4204, or 4212 of ERISA; no condition exists which presents a material risk
to the Borrower or any Subsidiary of the Borrower or any ERISA
<PAGE>
Affiliate of incurring a liability to or on account of a Plan or, to the best
knowledge of the Borrower after due inquiry, a Multiemployer Plan pursuant to
the foregoing provisions of ERISA and the Code; no proceedings have been
instituted to terminate or appoint a trustee to administer any Plan which is
subject to Title IV of ERISA; except as set forth in Part D of Schedule V, no
action, suit, proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of any Plan (other than
routine claims for benefits) is pending, expected or, to the best knowledge of
the Borrower after due inquiry, threatened; using actuarial assumptions and
computation methods consistent with Part 1 of subtitle E of Title IV of ERISA,
the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA
Affiliates to all Multiemployer Plans in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such
Multiemployer Plan ended prior to the date of the most recent Credit Event,
would not exceed an amount that could reasonably be expected to have a Material
Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) maintained by the Borrower or any Subsidiary
which covers or has covered employees or former employees of the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate has at all times been operated
in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA
and Section 4980B of the Code; no lien imposed under the Code or ERISA on the
assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
exists or is likely to arise on account of any Plan; and the Borrower and its
Subsidiaries may cease contributions to or terminate any employee benefit plan
maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. Neither the
Borrower nor any of its Subsidiaries has incurred any liability in connection
with the termination of or withdrawal from any Foreign Pension Plan that has not
been accrued or otherwise properly reserved on the Borrower's or such
Subsidiary's balance sheet. With respect to each Foreign Pension Plan that is
required by applicable local law or by its terms to be funded through a separate
funding vehicle, the present value of the accrued benefit liabilities (whether
or not vested) under each such Foreign Pension Plan, determined as of the latest
valuation date for such Foreign Pension Plan on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities by
an amount which, when added to the aggregate amount of the accrued benefit
liabilities with respect to all other Foreign Pension Plans, could reasonably be
expected to have a Material Adverse Effect.
7.13 Capitalization. On the Initial Borrowing Date and after giving
--------------
effect to the Transaction, the authorized capital stock of the Borrower shall
consist of (i) 20,000,000 shares of common stock, $.01 par value per share (such
authorized shares of common stock, together with any subsequently authorized
shares of common stock of the Borrower, the "Borrower Common Stock"), 10,440,000
of which shares shall be issued and outstanding and (ii) 1,000,000 shares of
Preferred Stock, $.01 par value per share, none of which shares shall be issued
and outstanding. All such outstanding shares have been duly and validly issued,
are fully paid and nonassessable and have been issued free of preemptive rights.
Except as set forth on Schedule X hereto, the
<PAGE>
Borrower does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
7.14 Subsidiaries. (a) Prior to the consummation of the
------------
Transaction, Acquisition Corp. has no Subsidiaries.
(b) On and as of the Initial Borrowing Date and after giving effect
to the Transaction, the Borrower has no Subsidiaries other than those
Subsidiaries listed on Schedule VII. Schedule VII correctly sets forth, as of
the Initial Borrowing Date and after giving effect to the Transaction, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock or other equity interests of each of its Subsidiaries and also
identifies the direct owner thereof. All outstanding shares of capital stock of
each Subsidiary of the Borrower have been duly and validly issued, are fully
paid and non-assessable and have been issued free of preemptive rights. No
Subsidiary of the Borrower has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any right to subscribe for or
to purchase, or any options or warrants for the purchase of, or any agreement
providing for the issuance (contingent or otherwise) of or any calls,
commitments or claims of any character relating to, its capital stock or any
stock appreciation or similar rights.
7.15 Intellectual Property, etc. Each of the Borrower and each of
---------------------------
its Subsidiaries owns or has a valid existing license to use all patents,
trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and other rights with respect to the foregoing reasonably necessary
for the conduct of its business, without any known conflict with the rights of
others which, or the failure to obtain which, as the case may be, would result
in a Material Adverse Effect.
7.16 Compliance with Statutes, etc. Each of the Borrower and each of
------------------------------
its Subsidiaries is in compliance with all applicable statutes, regulations,
rules and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such non-compliance as is not
reasonably likely to, individually or in the aggregate, have a Material Adverse
Effect.
7.17 Environmental Matters. (a) Each of the Borrower and its
---------------------
Subsidiaries has complied with, and on the date of each Credit Event is in
material compliance with, all applicable Environmental Laws and the requirements
of any permits issued under such Environmental Laws and neither the Borrower nor
any of its Subsidiaries is liable for any material penalties, fines or
forfeitures for failure to comply with any of the foregoing. There are no
pending or past or, to the best knowledge of the Borrower after due inquiry,
threatened Environmental Claims against the Borrower or any of its Subsidiaries,
or against any Real Property owned or operated by the Borrower or any of its
Subsidiaries. There are no facts, circumstances, conditions or occurrences with
respect to the business or operations of the Borrower or any of its Subsidiaries
or any Real Property at any time owned or operated by the Borrower or any of its
Subsidiaries or any property adjoining or in the vicinity of any such Real
Property that would reasonably be expected
<PAGE>
(i) to form the basis of an Environmental Claim against the Borrower or any of
its Subsidiaries or any such Real Property or (ii) to cause any such Real
Property to be subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Property by the Borrower or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported by the Borrower or any of its Subsidiaries
or by any Person acting for or under contract to the Borrower or any of its
Subsidiaries or, to the knowledge of the Borrower, by any other Person, to or
from any Real Property owned or operated by the Borrower or any of its
Subsidiaries except in material compliance with all applicable Environmental
Laws and as reasonably required in connection with the operation, use and
maintenance of such Real Property or by the Borrower's or such Subsidiary's
business. Hazardous Materials have not at any time been Released by the Borrower
or any of its Subsidiaries or by any Person acting for or under contract to the
Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, by any
other Person on or from any Real Property owned or operated by the Borrower or
any of its Subsidiaries, except in compliance with all applicable Environmental
Laws and as reasonably required in connection with the operation, use and
maintenance of such Real Property or by the Borrower's or such Subsidiary's
business. Except as set forth on Schedule XII, there are not now any
underground storage tanks located on any Real Property owned or operated by the
Borrower or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 7.17,
the representations made in this Section 7.17 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, would reasonably be expected to have a Material Adverse
Effect.
7.18 Properties. All Real Property owned by the Borrower or any of
----------
its Subsidiaries and all material Leaseholds leased by the Borrower or any of
its Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Schedule III. Each of the Borrower and each of its Subsidiaries
has good and marketable title to, or a validly subsisting leasehold interest in,
all material properties owned or leased by it, including all Real Property
reflected in Schedule III and in the financial statements (including the Pro
---
Forma Balance Sheet) referred to in Section 7.10(b) (except such properties sold
- -----
in the ordinary course of business since the dates of the respective financial
statements referred to therein), free and clear of all Liens, other than
Permitted Liens.
7.19 Labor Relations. Neither the Borrower nor any of its
---------------
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against the Borrower or any of its Subsidiaries or,
to the best knowledge of the Borrower and its Subsidiaries, threatened against
any of them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower and its
<PAGE>
Subsidiaries, threatened against any of them, (ii) no strike, labor dispute,
slowdown or stoppage pending against the Borrower or any of its Subsidiaries or,
to the best knowledge of the Borrower and its Subsidiaries, threatened against
the Borrower or any of its Subsidiaries and (iii) no union representation
question existing with respect to the employees of the Borrower or any of its
Subsidiaries and, to the best knowledge of the Borrower and its Subsidiaries, no
union organizing activities are taking place, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either individually or in the
aggregate) such as is not reasonably likely to have a Material Adverse Effect.
7.20 Tax Returns and Payments. Each of the Borrower and each of its
------------------------
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and fully provided for on the financial statements
of the Borrower and its Subsidiaries in accordance with generally accepted
accounting principles. Each of the Borrower and each of its Subsidiaries has
provided adequate reserves (in the good faith judgment of the management of the
Borrower) for the payment of all federal, state and foreign income taxes which
have not yet become due. There is no material action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of the Borrower
or any of its Subsidiaries, threatened by any authority regarding any taxes
relating to the Borrower or any of its Subsidiaries. Neither the Borrower nor
any of its Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower or
any of its Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of the Borrower or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations, in each case except to the extent the liability for taxes of the
Borrower or such Subsidiary giving rise to any extension of any such normally
applicable statute of limitation is not material.
7.21 Existing Indebtedness. Schedule IV sets forth a true and
---------------------
complete list of all Existing Indebtedness of the Borrower and its Subsidiaries
as of the Initial Borrowing Date after giving effect to the Transaction, in each
case showing the aggregate principal amount thereof and the name of the
respective borrower and any other entity which directly or indirectly guaranteed
such debt.
7.22 Insurance. Set forth on Schedule VIII hereto is a true, correct
---------
and complete summary of all insurance carried by each Credit Party on and as of
the Initial Borrowing Date, with the amounts insured set forth therein.
7.23 Representations and Warranties in Other Documents. All
-------------------------------------------------
representations and warranties set forth in the other Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made) and shall be true and correct in all
material respects as of the Initial Borrowing Date as if such representations or
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations or warranties shall be
true and correct in all material respects as of such earlier date.
<PAGE>
7.24 The Transaction. At the time of consummation thereof, the
---------------
Transaction shall have been consummated in all material respects in accordance
with the terms of the relevant Documents therefor and all applicable laws. At
the time of consummation thereof, all material consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required in order to
make or consummate the Transaction in accordance with the terms of the relevant
Documents therefor and all applicable laws have been obtained, given, filed or
taken and are or will be in full force and effect (or effective judicial relief
with respect thereto has been obtained). All applicable waiting periods with
respect thereto have or, prior to the time when required, will have, expired
without, in all such cases, any action being taken by any competent authority
which restrains, prevents, or imposes material adverse conditions upon the
Transaction. Additionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon any element
of the Transaction, the occurrence of any Credit Event, or the performance by
the Borrower and its Subsidiaries of their respective obligations under the
Documents and all applicable laws.
7.25 Special Purpose Corporation. Pacer Logistics Acquisition Corp.
---------------------------
was formed to effect the Pacer Logistics Acquisition. Prior to the consummation
of the Transaction, Pacer Logistics Acquisition Corp. had no significant assets
or liabilities (other than those liabilities under the Pacer Logistics
Acquisition Documents and such other liabilities arising in connection with the
Pacer Logistics Acquisition).
7.26 Subordination. The subordination provisions contained in the
-------------
Senior Subordinated Notes Documents and, on and after the execution and delivery
thereof, each of the agreements or instruments relating to the Shareholder
Subordinated Notes, Permitted Subordinated Refinancing Indebtedness and
Permitted Subordinated Indebtedness, are enforceable against the Borrower, the
Subsidiary Guarantors and the holders of such Indebtedness, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law), and all Obligations hereunder and all
obligations of the Credit Parties under the other Credit Documents (including
without limitation, the Subsidiaries Guaranty) are within the definitions of
"Senior Debt" (or "Guarantor Senior Debt" in the case of the obligations of any
Subsidiary Guarantor) and "Designated Senior Debt" included in such
subordination provisions.
7.27 Year 2000 Representation. Any reprogramming required to permit
------------------------
the proper functioning, in and following the year 2000, of (i) the Borrower's
and its Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which the
Borrower's and its Subsidiaries' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by November 15,
1999, except to the extent the failure to complete such reprogramming would not
reasonably be expected to result in a Default, an Event of Default or a Material
Adverse Effect. The cost to the Borrower and its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Borrower and its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others'
<PAGE>
systems or equipment) could not reasonably be expected to result in a Default,
an Event of Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Agreement to be, sufficient to permit the Borrower and its
Subsidiaries to conduct their respective businesses without a Material Adverse
Effect.
SECTION 8. Affirmative Covenants. The Borrower hereby covenants and
---------------------
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Commitment has terminated, no Letters
of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and all other Obligations (other than any indemnities
described in Section 13.13 which are not then due and payable) incurred
hereunder, are paid in full:
8.01 Information Covenants. The Borrower will furnish to each Bank:
---------------------
(a) Monthly Reports. Within 60 days after the end of each fiscal
---------------
month of the Borrower, (i) the consolidated balance sheet of the Borrower
and its Subsidiaries as at the end of such fiscal month and the related
consolidated statements of income for such fiscal month and for the elapsed
portion of the fiscal year ended with the last day of such fiscal month, in
each case (x) without giving effect to any Permitted Acquisition
consummated in the 60-day period prior to the end of such fiscal month and
(y) setting forth comparative figures for the corresponding fiscal month in
the prior fiscal year and comparable budgeted figures for such fiscal month
as set forth in the respective budget delivered pursuant to Section 8.01(d)
and (ii) the consolidated statements of income for such fiscal month for
each Acquired Business acquired during the 60-day period prior to the end
of such fiscal month, all of which shall be certified by the chief
financial officer or other Authorized Officer of the Borrower, subject to
normal year-end audit adjustments and the absence of footnotes.
(b) Quarterly Financial Statements. Within 45 days after the close
of the first three quarterly accounting periods in each fiscal year of the
Borrower, (i) the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and of cash
flows for such quarterly accounting period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly accounting period
and the budgeted figures for such quarterly period as set forth in the
respective budget delivered pursuant to Section 8.01(d) and (ii)
management's discussion and analysis of significant operational and
financial developments during such quarterly period, all of which shall be
in reasonable detail and certified by the chief financial officer or other
Authorized Officer of the Borrower that they fairly present in all material
respects the financial condition of the Borrower and its Subsidiaries as of
the dates indicated and the results of their operations and changes in
their cash flows for the periods indicated, subject to normal year-end
audit adjustments and the absence of footnotes. If the Borrower has
designated any Unrestricted Subsidiaries hereunder, then the quarterly
<PAGE>
financial information required by this Section 8.01(b) shall include a
reasonably detailed presentation, either on the face of the financial
statements or in the footnotes thereto, and in management's discussion and
analysis of operational and financial developments, of the financial
condition and results of operations of the Borrower and its Subsidiaries
separate from the financial condition and results of operations of the
Unrestricted Subsidiaries of the Borrower.
(c) Annual Financial Statements. Within 90 days after the close of
---------------------------
each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal year and setting forth comparative consolidated
figures for the preceding fiscal year and comparable budgeted figures for
such fiscal year as set forth in the respective budget delivered pursuant
to Section 8.01(d) and (except for such comparable budgeted figures)
certified by PriceWaterhouseCoopers LLC or such other independent certified
public accountants of recognized national standing as shall be reasonably
acceptable to the Administrative Agent, in each case to the effect that
such statements fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries as of the dates indicated
and the results of their operations and changes in financial position for
the periods indicated in conformity with GAAP applied on a basis consistent
with prior years, together with a certificate of such accounting firm
stating that in the course of its regular audit of the business of the
Borrower and its Subsidiaries, which audit was conducted in accordance with
generally accepted auditing standards, no Default or Event of Default which
has occurred and is continuing has come to their attention or, if such a
Default or an Event of Default has come to their attention, a statement as
to the nature thereof. If the Borrower has designated any Unrestricted
Subsidiaries hereunder, then the annual financial information required by
this Section 8.01(c) shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes thereto,
and in management's discussion and analysis of operational and financial
developments, of the financial condition and results of operations of the
Borrower and its Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Borrower.
(d) Budgets, etc. Not more than 60 days after the commencement of
-------------
each fiscal year of the Borrower, consolidated budgets of the Borrower and
its Subsidiaries (x) in reasonable detail for each of the four fiscal
quarters of such fiscal year and (y) in summary form for each of the five
fiscal years immediately following such fiscal year, in each case as
customarily prepared by management for its internal use setting forth, with
appropriate discussion, the principal assumptions upon which such budgets
are based. Together with each delivery of financial statements pursuant to
Sections 8.01(b) and (c), a comparison of the current year to date
financial results against the budgets required to be submitted pursuant to
this clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Sections 8.01(b) and (c), a
certificate of the chief financial officer
<PAGE>
or other Authorized Officer of the Borrower to the effect that, to the best
of such officer's knowledge, no Default or Event of Default exists or, if
any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall, (I) if delivered in connection
with the financial statements in respect of a period ending on the last day
of a fiscal quarter or fiscal year of the Borrower, set forth (x) the
calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the provisions of Sections 3.03, 4.02,
9.02, 9.04(d), (g), (j) and (k), 9.05(a), (f), (g), (l), (p) and (r), 9.09,
9.10 and 9.11 as at the end of such fiscal quarter or year, as the case may
be, and (y) the calculation of the Total Leverage Ratio, the Adjusted Total
Leverage Ratio and the Adjusted Senior Leverage Ratio as at the last day of
the respective fiscal quarter or fiscal year of the Borrower, as the case
may be and (II) if delivered with the financial statements required by
Section 8.01(c), set forth in reasonable detail the amount of (and the
calculations required to establish the amount of) Excess Cash Flow for the
respective Excess Cash Flow Payment Period.
(f) Notice of Default or Litigation. Promptly, and in any event
-------------------------------
within three Business Days after an executive officer of the Borrower or
any of its Subsidiaries obtains actual knowledge thereof, notice of (i) the
occurrence of any event which constitutes a Default or an Event of Default,
which notice shall specify the nature and period of existence thereof and
what action the Borrower proposes to take with respect thereto, (ii) any
litigation or proceeding pending or threatened (x) against the Borrower or
any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect, (y) with respect to any material Indebtedness of
the Borrower or any of its Subsidiaries or (z) with respect to any Document
(other than such Documents referred to in clause (ix) of the definition
thereof), (iii) any governmental investigation pending or threatened
against the Borrower or any of its Subsidiaries and (iv) any other event
which could reasonably be expected to have a Material Adverse Effect.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
-----------------
report or "management letter" submitted to the Borrower or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower or any
of its Subsidiaries and the management's non-privileged responses thereto.
(h) Environmental Matters. Promptly after an executive officer of the
---------------------
Borrower or any of its Subsidiaries obtains actual knowledge of any of the
following (but only to the extent that any of the following, either
individually or in the aggregate, could reasonably be expected to (x) have
a Material Adverse Effect or (y) result in a remedial cost to the Borrower
or any of its Subsidiaries in excess of $250,000, written notice of:
(i) any pending or threatened Environmental Claim against the
Borrower or any of its Subsidiaries or any Real Property owned or
operated by the Borrower or any of its Subsidiaries;
<PAGE>
(ii) any condition or occurrence on any Real Property at any
time owned or operated by the Borrower or any of its Subsidiaries that
(x) results in noncompliance by the Borrower or any of its
Subsidiaries with any applicable Environmental Law or (y) could
reasonably be anticipated to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that could
reasonably be anticipated to cause such Real Property to be subject to
any restrictions on the ownership, occupancy, use or transferability
by the Borrower or such Subsidiary, as the case may be, of its
interest in such Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by the Borrower or any of its
Subsidiaries.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and the Borrower's response or proposed response thereto. In addition, the
Borrower agrees to provide the Banks with copies of all material
communications by the Borrower or any of its Subsidiaries with any Person,
government or governmental agency relating to Environmental Laws or to any
of the matters set forth in clauses (i)-(iv) above, and such reasonably
detailed reports relating to any of the matters set forth in clauses (i)-
(iv) above as may reasonably be requested by the Administrative Agent or
the Required Banks.
(i) Annual Meetings with Banks. At the written request of the
--------------------------
Administrative Agent, the Borrower shall within 120 days after the close of
each of its fiscal years, hold a meeting (at a mutually agreeable location
and time) open to all of the Banks at which meeting shall be reviewed the
financial results of the previous fiscal year and the financial condition
of the Borrower and its Subsidiaries and the budgets presented for the
current fiscal year of the Borrower and its Subsidiaries.
(j) Notice of Commitment Reductions and Mandatory Repayments. On or
--------------------------------------------------------
prior to the date of any reduction to the Total Revolving Loan Commitment
or any mandatory repayment of outstanding Term Loans pursuant to any of
Sections 4.02(c) through (f), inclusive, the Borrower shall provide written
notice of the amount of the respective reduction or repayment, as the case
may be, to the Total Revolving Loan Commitment or the outstanding Term
Loans, as applicable, and the calculation thereof (in reasonable detail).
(k) Special Reports Relating to Tractor Trailers. At the time of the
---------------------------------------------
delivery of the financial statements provided for in Sections 8.01(c), a
schedule of all of the Tractor Trailers owned by the Borrower or any of its
Subsidiaries as of the fiscal quarter most recently ended, which schedule
shall specify (i) the state in which the respective Tractor
<PAGE>
Trailer is registered or titled, (ii) whether a security interest has been
recorded on the certificate of title for the respective Tractor Trailer in
favor of the Collateral Agent for the benefit of the Secured Creditors,
(iii) whether the certificate of title for the respective Tractor Trailer
(as modified to reflect the security interest in favor of the Collateral
Agent) has been reregistered with the appropriate state governmental agency
(and, if not, the date by which such reregistration must be accomplished in
accordance with the terms of the relevant Security Agreement), (iv) in the
case of Tractor Trailers operated in Canada, whether a financing statement
or hypothec registration has been filed with the appropriate province, (v)
the date of the acquisition of each new Tractor Trailer acquired on or
after the Initial Borrowing Date, and (vi) each Tractor Trailer listed
thereon acquired since the date of the delivery of the previous schedule
pursuant to this Section 8.01(k).
(l) Other Information. Promptly upon transmission thereof, copies
-----------------
of any filings and registrations with, and reports to, the SEC by the
Borrower or any of its Subsidiaries and copies of all financial statements,
proxy statements, notices and reports as the Borrower or any of its
Subsidiaries shall send generally to analysts and the holders of their
capital stock or of any Permitted Debt or the Senior Subordinated Notes, in
their capacity as such holders (to the extent not theretofore delivered to
the Banks pursuant to this Agreement) and, with reasonable promptness, such
other information or documents (financial or otherwise) as any Agent on its
own behalf or on behalf of the Required Banks may reasonably request from
time to time.
8.02 Books, Records and Inspections. The Borrower will, and will
------------------------------
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities. The Borrower will, and will cause each of its
Subsidiaries to, permit, upon reasonable notice to the chief financial officer
or other Authorized Officer of the Borrower, officers and designated
representatives of any Agent or the Required Banks to visit and inspect under
the guidance of officers of the Borrower any of the properties or assets of the
Borrower and any of its Subsidiaries in whomsoever's possession, and to examine
the books of account of the Borrower and any of its Subsidiaries and discuss the
affairs, finances and accounts of the Borrower and of any of its Subsidiaries
with, and be advised as to the same by, their officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as such Agent or the Required Banks may desire, provided that so long as
--------
no Default or Event of Default is then in existence, the Borrower shall have the
right to participate in any discussions of the Agents or the Banks with any
independent accountants of the Borrower.
8.03 Insurance. (a) The Borrower will, and will cause each of its
---------
Subsidiaries to (i) maintain, with financially sound and reputable insurance
companies, insurance on all its property in at least such amounts and against at
least such risks as is consistent and in accordance with industry practice and
(ii) furnish to the Administrative Agent and each of the Banks, upon request,
full information as to the insurance carried. In addition to the requirements of
the immediately preceding sentence, the Borrower will at all times cause
insurance of the types
<PAGE>
described in Schedule VIII to be maintained (with the same scope of coverage as
that described in Schedule VIII) at levels which are consistent with its
practices immediately before the Initial Borrowing Date, taking into account the
age and fair market value of equipment. Such insurance shall include physical
damage insurance on all real and personal property (whether now owned or
hereafter acquired) on an all risk basis and business interruption insurance.
The provisions of this Section 8.03 shall be deemed supplemental to, but not
duplicative of, the provisions of any Security Documents that require the
maintenance of insurance.
(b) The Borrower will, and will cause each of its Subsidiaries to,
at all times keep the respective property of the Borrower and its Subsidiaries
(except real or personal property leased or financed through third parties in
accordance with this Agreement) insured in favor of the Collateral Agent, and
all policies or certificates with respect to such insurance (and any other
insurance maintained by, or on behalf of, the Borrower or any Subsidiary of the
Borrower) (i) shall be endorsed to the Collateral Agent's satisfaction for the
benefit of the Collateral Agent (including, without limitation, by naming the
Collateral Agent as certificate holder, mortgagee and loss payee with respect to
real property, certificate holder and loss payee with respect to personal
property, additional insured with respect to general liability and umbrella
liability coverage and certificate holder with respect to workers' compensation
insurance), (ii) shall state that such insurance policies shall not be cancelled
or materially changed without at least 30 days' prior written notice thereof by
the respective insurer to the Collateral Agent and (iii) shall, upon the request
of the Collateral Agent, be deposited with the Collateral Agent.
(c) If the Borrower or any of its Subsidiaries shall fail to
maintain all insurance in accordance with this Section 8.03, or if the Borrower
or any of its Subsidiaries shall fail to so name the Collateral Agent as an
additional insured, mortgagee or loss payee, as the case may be, or so deposit
all certificates with respect thereto, the Administrative Agent and/or the
Collateral Agent shall have the right (but shall be under no obligation) to
procure such insurance, and the Credit Parties agree to jointly and severally
reimburse the Administrative Agent or the Collateral Agent, as the case may be,
for all costs and expenses of procuring such insurance.
8.04 Payment of Taxes. The Borrower will pay and discharge, and will
----------------
cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any material properties belonging to it, prior to the
date on which penalties attach thereto, and all material lawful claims for sums
that have become due and payable which, if unpaid, might become a Lien not
otherwise permitted under Section 9.03(a); provided, that neither the Borrower
--------
nor any of its Subsidiaries shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves with respect thereto in
accordance with GAAP.
8.05 Corporate Franchises. The Borrower will do, and will cause each
--------------------
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises, authority to do business, licenses and patents, except for rights,
franchises, authority to do business, licenses and patents the loss of which
(individually or in the aggregate) could not reasonably be expected to have a
Material
<PAGE>
Adverse Effect; provided, however, that any transaction permitted by Section
-------- -------
9.02 will not constitute a breach of this Section 8.05.
8.06 Compliance with Statutes; etc. The Borrower will, and will
------------------------------
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except for such noncompliances as
would not, either individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect on the ability of any Credit Party to
perform its obligations under any Credit Document to which it is a party.
8.07 Compliance with Environmental Laws. (a) (i) The Borrower will
----------------------------------
comply, and will cause each of its Subsidiaries to comply, in all material
respects with all Environmental Laws applicable to their businesses or the
ownership or use of its Real Property now or hereafter owned or operated by the
Borrower or any of its Subsidiaries, will promptly pay or, with respect to any
of its Subsidiaries, cause to be paid all costs and expenses incurred in
connection with such compliance, and will keep or cause to be kept all such Real
Property free and clear of any Liens imposed pursuant to such Environmental Laws
and (ii) neither the Borrower nor any of its Subsidiaries will generate, use,
treat, store, Release or dispose of, or permit the generation, use, treatment,
storage, release or disposal of, Hazardous Materials on any Real Property owned
or operated by the Borrower or any of its Subsidiaries other than in compliance
with Environmental Laws and as required in connection with the normal business
operations of the Borrower and its Subsidiaries, or transport or permit the
transportation of Hazardous Materials other than in compliance with
Environmental Laws and as required in connection with the normal business
operations of the Borrower and its Subsidiaries, unless the failure to comply
with the requirements specified in clause (i) or (ii) above, either individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect. If the Borrower or any of its Subsidiaries or any tenant or occupant of
any Real Property owned or operated by the Borrower or any of its Subsidiaries
causes or permits any intentional or unintentional act or omission resulting in
the presence or Release of any Hazardous Material in a quantity or concentration
sufficient to require reporting or to trigger an obligation to undertake clean-
up, removal or remedial action under applicable Environmental Laws, the Borrower
agrees to undertake, and/or to cause any of its Subsidiaries, tenants or
occupants to undertake, at their sole expense, any clean up, removal, remedial
or other action required pursuant to Environmental Laws to remove and clean up
any Hazardous Materials from any Real Property except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect; provided
--------
that neither the Borrower nor any of its Subsidiaries shall be required to
undertake any clean up, removal, remedial or other action while the requirement
to undertake such clean up, removal, remedial or other action is being contested
in good faith and by proper proceedings so long as it has maintained adequate
reserves with respect to such clean up, removal, remedial or other action to the
extent required in accordance with GAAP. Notwithstanding any provision of this
Section 8.07(a), the Borrower shall not be required by this Section to exercise
any degree of control over the operations of any of its Subsidiaries that could
reasonably be construed under applicable Environmental Law to make the Borrower
liable for Environmental Claims arising from or casually related to the Real
Property or operations of such Subsidiary as an owner or an operator or upon any
other basis.
<PAGE>
(b) At the written request of the Administrative Agent or the
Required Banks, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, the Borrower will provide, at its
sole cost and expense, an environmental site assessment report concerning any
Real Property now or hereafter owned or operated by the Borrower or any of its
Subsidiaries, prepared by an environmental consulting firm approved by the
Administrative Agent, addressing the matters in clause (i), (ii) or (iii) below
which gives rise to such request (or, in the case of a request pursuant to
following clause (i), addressing such matter as may be requested by the
Administrative Agent or the Required Banks) and estimating the range of the
potential costs of any removal, remedial or other corrective action in
connection with any such matter, provided that in no event shall such request be
--------
made unless (i) an Event of Default has occurred and is continuing, (ii) the
Banks receive notice under Section 8.01(h) for any event for which notice is
required to be delivered for any such Real Property or (iii) the Administrative
Agent or the Required Banks reasonably believe that there was a breach of any
representation, warranty or covenant contained in Section 7.17 or 8.07(a). If
the Borrower fails to provide the same within 60 days after such request was
made, the Administrative Agent may order the same, and the Borrower shall grant
and hereby grants, to the Administrative Agent and the Banks and their agents
access to such Real Property owned or operated by the Borrower or any of its
Subsidiaries, and specifically grants the Administrative Agent and the Banks and
their agents an irrevocable non-exclusive license, subject to the rights of
tenants, to undertake such an assessment, all at the Borrower's expense.
8.08 ERISA. As soon as possible and, in any event, within ten
-----
Business Days after the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate knows or has reason to know of the occurrence of any of the following,
the Borrower will deliver to each of the Banks a certificate of the chief
financial officer of the Borrower setting forth the full details as to such
occurrence and the action, if any, that the Borrower, such Subsidiary or such
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Borrower, the
Subsidiary, the ERISA Affiliate, the PBGC or any other governmental agency, a
Plan or, to the extent received by the Borrower, Multiemployer Plan participant
or the Plan or Multiemployer Plan administrator with respect thereto: that a
Reportable Event has occurred (except to the extent that the Borrower has
previously delivered to the Banks a certificate and notices (if any) concerning
such event pursuant to the next clause hereof); that a contributing sponsor (as
defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA
is subject to the advance reporting requirement of PBGC Regulation Section
4043.61 (without regard to subparagraph (b)(1) thereof), and an event described
in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 is reasonably expected to occur within the following 30 days; that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA, has been incurred or an application has been made or is
reasonably expected to be made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code or Section 303 or 304
of ERISA with respect to a Plan; that any contribution required to be made by
the Borrower, any Subsidiary or any ERISA Affiliate with respect to a Plan, a
Multiemployer Plan or Foreign Pension Plan has not been timely made; that a Plan
or a Multiemployer Plan has been or is reasonably expected to be terminated,
reorganized, partitioned or declared insolvent under Title
<PAGE>
IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings
have been or are reasonably expected to be instituted to terminate or appoint a
trustee to administer a Plan or a Multiemployer Plan which is subject to Title
IV of ERISA; that a proceeding has been instituted against the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate pursuant to Section 515 of
ERISA to collect a delinquent contribution to a Multiemployer Plan; that the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or is
reasonably expected to incur any liability (including any indirect, contingent,
or secondary liability) to or on account of the termination of or withdrawal
from a Plan or a Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971
or 4980 of the Code or with respect to a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B
of the Code; that the Borrower or any Subsidiary of the Borrower will or is
reasonably expected to incur any liability (including any indirect, contingent,
or secondary liability) with respect to a Plan under Section 4975 of the Code or
Section 409, 502 (i) or 502(1) of ERISA; or that the Borrower or any Subsidiary
of the Borrower will or is reasonably expected to incur any material liability
pursuant to any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) that provides benefits to retired employees or other former employees
(other than as required by Section 601 of ERISA) or any Plan. The Borrower will
deliver to each of the Banks (i) at the request of any Bank on ten Business
Days' notice a complete copy of the annual report (on Internal Revenue Service
Form 5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service and (ii) copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, copies of any material
documents or other information required to be furnished to the PBGC, and any
material notices received by the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate with respect to any Plan, Multiemployer Plan or Foreign Pension
Plan shall be delivered to the Banks no later than ten Business Days after the
date such documents and/or information has been furnished to the PBGC or such
notice has been received by the Borrower, such Subsidiary or such ERISA
Affiliate, as applicable.
8.09 Good Repair. The Borrower will, and will cause each of its
-----------
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, ordinary wear and
tear excepted, and that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
useful or customary for companies in similar businesses.
8.10 End of Fiscal Years; Fiscal Quarters. The Borrower will, for
------------------------------------
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries' (other than Pacer Logistics' and Pacer Logistics' Subsidiaries'),
fiscal years to end on the Friday nearest to December 31 of each calendar year
and (ii) each of its, and each of its Subsidiaries' (other than Pacer Logistics'
and Pacer Logistics' Subsidiaries'), (x) first fiscal quarter in each fiscal
year to end on last day of the 14/th/ week of such fiscal year, (y) the second
and third fiscal quarters in each fiscal year to end
<PAGE>
on the last day of the 26/th/ and 38/th/ weeks, respectively, of such fiscal
year and (z) the fourth fiscal quarter in each fiscal year to end on the last
day of the 52nd week (or in the case of the fiscal year ending on the Friday
nearest to December 31, 2004, the 53rd week) of such fiscal year. The Borrower
will, for financial reporting purposes, cause (i) Pacer Logistics' and each of
its Subsidiaries' fiscal years to end on December 31 of each calendar year and
(ii) Pacer Logistics' and each of its Subsidiaries' fiscal quarters to end on
March 31, June 30, September 30 and December 31 of each year.
8.11 Additional Security; Further Assurances. (a) The Borrower
---------------------------------------
will, and will cause each of its Wholly-Owned Domestic Subsidiaries (and to the
extent Section 8.12 is operative, each of its Wholly-Owned Foreign Subsidiaries)
to, grant to the Collateral Agent security interests and mortgages in such
assets and real property of the Borrower and its Subsidiaries as are not covered
by the original Security Documents, in each case to the extent requested from
time to time by the Administrative Agent or the Required Banks (collectively,
the "Additional Security Documents"). All such security interests and mortgages
shall be granted pursuant to documentation reasonably satisfactory in form and
substance to the Collateral Agent and shall constitute valid and enforceable
perfected security interests, hypothecations and mortgages superior to and prior
to the rights of all third Persons and enforceable as against third parties and
subject to no other Liens except for Permitted Liens. The Additional Security
Documents or instruments related thereto shall have been duly recorded or filed
in such manner and in such places as are required by law to establish, perfect,
preserve and protect the Liens in favor of the Collateral Agent required to be
granted pursuant to the Additional Security Documents and all taxes, fees and
other charges payable in connection therewith shall have been paid in full.
Notwithstanding the foregoing, this Section 8.11(a) shall not apply to (and the
Borrower and its Subsidiaries shall not be required to grant a mortgage in) any
Real Property the fair market value of which (as determined in good faith by
senior management of the Borrower) is less than $5,000,000.
(b) The Borrower will, and will cause each of its Subsidiaries to,
at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
Collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require (including, without limitation, (x) reregistering the
certificate of title of any Tractor Trailer in any state in which such Tractor
Trailer primarily operates, to the extent the Collateral Agent determines, in
its reasonable discretion, that such action is required to ensure the perfection
or the enforceability as against third parties of its security interest in such
Collateral and (y) furnishing a schedule of all units of Rolling Stock owned by
the Borrower and its Subsidiaries and the serial or other identification number
assigned to each such unit). Furthermore, the Borrower shall cause to be
delivered to the Collateral Agent such opinions of counsel, title insurance and
other related documents as may be reasonably requested by the Collateral Agent
to assure itself that this Section 8.11 has been complied with.
<PAGE>
(c) The Borrower agrees that each action required above by this
Section 8.11 shall be completed as soon as possible, but in no event later than
90 days after such action is either requested to be taken by the Administrative
Agent, the Collateral Agent or the Required Banks or required to be taken by the
Borrower and its Subsidiaries pursuant to the terms of this Section 8.11;
provided that in no event will the Borrower or any of its Subsidiaries be
- --------
required to take any action, other than using its commercially reasonable
efforts, to obtain consents from third parties with respect to its compliance
with this Section 8.11.
8.12 Foreign Subsidiaries Security. If following a change in the
-----------------------------
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Administrative Agent does not within 30
days after a request from the Administrative Agent or the Required Banks deliver
evidence, in form and substance mutually satisfactory to the Administrative
Agent and the Borrower, with respect to any Foreign Subsidiary (and in the case
of clause (i) below, any Foreign Unrestricted Subsidiary) of the Borrower which
has not already had all of its stock pledged pursuant to the Pledge Agreement
that (i) a pledge of more than 66-2/3% of the total combined voting power of all
classes of capital stock of such Foreign Subsidiary (or Foreign Unrestricted
Subsidiary) entitled to vote, (ii) the entering into by such Foreign Subsidiary
of a security agreement in substantially the form of the Security Agreement,
(iii) the entering into by such Foreign Subsidiary of a pledge agreement in
substantially the form of the Pledge Agreement and (iv) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiaries Guaranty, in any such case could reasonably be expected to cause
(I) the undistributed earnings of such Foreign Subsidiary (or Foreign
Unrestricted Subsidiary) as determined for Federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary's (or Foreign
Unrestricted Subsidiary's) United States parent for Federal income tax purposes
or (II) other material adverse Federal income tax consequences to the Credit
Parties, then in the case of a failure to deliver the evidence described in
clause (i) above, that portion of such Foreign Subsidiary's (or Foreign
Unrestricted Subsidiary's, as the case may be) outstanding capital stock so
issued by such Foreign Subsidiary (or Foreign Unrestricted Subsidiary, as the
case may be), in each case not theretofore pledged pursuant to the Pledge
Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) or (iii) above, such Foreign
Subsidiary (to the extent same is a Wholly-Owned Foreign Subsidiary) shall
execute and deliver the Security Agreement (or another security agreement in
substantially similar form, if needed) or the Pledge Agreement (or another
pledge agreement in substantially similar form, if needed), as the case may be,
granting to the Collateral Agent for the benefit of the Secured Creditors a
security interest in all of such Foreign Subsidiary's assets or the capital
stock and promissory notes owned by such Foreign Subsidiary, as the case may be,
and securing the obligations of the Borrower under the Credit Documents and
under any Interest Rate Protection Agreement or Other Hedging Agreement and, in
the event the Subsidiaries Guaranty shall have been executed by such Foreign
Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the
case of a failure to deliver the evidence described in clause (iv) above, such
Foreign Subsidiary (to the extent same is a Wholly-Owned Foreign Subsidiary)
shall execute and deliver the Subsidiaries Guaranty (or another guaranty in
substantially similar form, if needed), guaranteeing
<PAGE>
the obligations of the Borrower under the Credit Documents and under any
Interest Rate Protection Agreement or Other Hedging Agreement, in each case to
the extent that the entering into of such Security Agreement, Pledge Agreement
or Subsidiaries Guaranty (or substantially similar document) is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 8.12 to be in form and substance reasonably
satisfactory to the Administrative Agent and/or the Collateral Agent.
8.13 Use of Proceeds. All proceeds of the Loans shall be used as
---------------
provided in Section 7.05.
8.14 Permitted Acquisitions. (a) Subject to the provisions of this
----------------------
Section 8.14 and the requirements contained in the definition of Permitted
Acquisition, the Borrower and any of its Wholly-Owned Domestic Subsidiaries may
from time to time effect Permitted Acquisitions, so long as (in each case except
to the extent the Required Banks otherwise specifically agree in writing in the
case of a specific Permitted Acquisition): (i) no Default or Event of Default
shall be in existence at the time of the consummation of the proposed Permitted
Acquisition or immediately after giving effect thereto; (ii) the Borrower shall
have given the Administrative Agent and the Banks at least 5 Business Days'
prior written notice of any Permitted Acquisition; (iii) calculations are made
by the Borrower of compliance with the covenants contained in Sections 9.09 and
9.10 (in each case, giving effect to the last sentence appearing therein) for
the period of four consecutive fiscal quarters (taken as one accounting period)
most recently ended prior to the date of such Permitted Acquisition (each, a
"Calculation Period"), on a Pro Forma Basis as if the respective Permitted
--- -----
Acquisition (as well as all other Permitted Acquisitions theretofore consummated
after the first day of such Calculation Period) had occurred on the first day of
such Calculation Period, and such recalculations shall show that such financial
covenants would have been complied with if the Permitted Acquisition had
occurred on the first day of such Calculation Period (for this purpose, if the
first day of the respective Calculation Period occurs prior to the Initial
Borrowing Date, calculated as if the covenants contained in said Sections 9.09
and 9.10 (in each case, giving effect to the last sentence appearing therein)
had been applicable from the first day of the Calculation Period); (iv) based on
good faith projections prepared by the Borrower for the period from the date of
the consummation of the Permitted Acquisition to the date which is one year
thereafter, the level of financial performance measured by the covenants set
forth in Sections 9.09 and 9.10 (in each case, giving effect to the last
sentence appearing therein) shall be better than or equal to such level as would
be required to provide that no Default or Event of Default would exist under the
financial covenants contained in Sections 9.09 and 9.10 (in each case, giving
effect to the last sentence appearing therein) through the date which is one
year from the date of the consummation of the respective Permitted Acquisition;
(v) calculations are made by the Borrower demonstrating compliance with an
Adjusted Senior Leverage Ratio not to exceed 3.00:1.0 on the last day of the
relevant Calculation Period, on a Pro Forma Basis as if the respective Permitted
--- -----
Acquisition (as well as all other Permitted Acquisitions theretofore consummated
after the first day of such Calculation Period) had occurred on the first day of
such Calculation Period; (vi) the Maximum Permitted Consideration payable in
connection with the proposed Permitted Acquisition does not exceed $25,000,000
(or, in the case of the acquisition of Conex pursuant to a Permitted
Acquisition, $40,000,000); (vii) all representations and warranties
<PAGE>
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Permitted Acquisition
(both before and after giving effect thereto), unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date; (viii) the
Borrower provides to the Administrative Agent and the Banks as soon as available
but not later than 5 Business Days after the execution thereof, a copy of any
executed purchase agreement or similar agreement with respect to such Permitted
Acquisition; (ix) after giving effect to such Permitted Acquisition and the
payment of all post-closing purchase price adjustments required (in the good
faith determination of the Borrower) in connection with such Permitted
Acquisition (and all other Permitted Acquisitions for which such purchase price
adjustments may be required to be made) and all capital expenditures (and the
financing thereof) reasonably anticipated by the Borrower to be made in the
business acquired pursuant to such Permitted Acquisition within the 90-day
period (such period for any Permitted Acquisition, a "Post-Closing Period")
following such Permitted Acquisition (and in the businesses acquired pursuant to
all other Permitted Acquisitions with Post-Closing Periods ended during the
Post-Closing Period of such Permitted Acquisition), the Total Unutilized
Revolving Loan Commitment shall equal or exceed $15,000,000; and (x) the
Borrower shall have delivered to the Administrative Agent an officer's
certificate executed by an Authorized Officer of the Borrower, certifying to the
best of his knowledge, compliance with the requirements of preceding clauses (i)
through (ix), inclusive, and containing the calculations required by the
preceding clauses (iii), (iv), (v), (vi) and (ix); provided, however, that so
-------- -------
long as (x) the Maximum Permitted Consideration payable in connection with the
proposed Permitted Acquisition does not exceed $2,500,000 and (y) the Maximum
Permitted Consideration paid in connection with the proposed Permitted
Acquisition, when combined with the Maximum Permitted Consideration paid in
connection with all other Permitted Acquisitions consummated in the same fiscal
quarter as such proposed Permitted Acquisition, does not exceed $5,000,000, the
Borrower shall not be required to comply with clauses (ii) and (viii) above in
connection with such Permitted Acquisition and the officer's certificate
otherwise required to be delivered pursuant to clause (x) above shall instead be
delivered to the Administrative Agent within 45 days following the end of the
fiscal quarter in which such Permitted Acquisition is consummated.
(b) At the time of each Permitted Acquisition involving the creation
or acquisition of a Subsidiary, or the acquisition of capital stock or other
equity interest of any Person, the capital stock or other equity interests
thereof created or acquired in connection with such Permitted Acquisition shall
be pledged for the benefit of the Secured Creditors pursuant to the Pledge
Agreement in accordance with the requirements of Section 9.15.
(c) The Borrower shall cause each Subsidiary which is formed to
effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and
to execute and deliver, all of the documentation required by, Sections 8.11 and
9.15, to the reasonable satisfaction of the Administrative Agent.
(d) The consummation of each Permitted Acquisition shall be deemed to
be a representation and warranty by the Borrower that the certifications by the
Borrower (or by one or
<PAGE>
more of its Authorized Officers) pursuant to Section 8.14(a) are true and
correct and that all conditions thereto have been satisfied and that same is
permitted in accordance with the terms of this Agreement, which representation
and warranty shall be deemed to be a representation and warranty for all
purposes hereunder, including, without limitation, Sections 6 and 10.
8.15 Performance of Obligations. The Borrower will, and will cause
--------------------------
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, deed of trust, indenture, loan agreement or credit agreement and
each other material agreement, contract or instrument by which it is bound,
except such non-performances as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
8.16 Maintenance of Company Separateness. The Borrower will, and
-----------------------------------
will cause each of its Subsidiaries and Unrestricted Subsidiaries to, satisfy
customary Company formalities, including, as applicable, the holding of regular
board of directors' and shareholders' meetings or action by directors or
shareholders without a meeting and the maintenance of Company offices and
records. Neither the Borrower nor any of its Subsidiaries shall make any
payment to a creditor of any Unrestricted Subsidiary in respect of any liability
of any Unrestricted Subsidiary, and no bank account of any Unrestricted
Subsidiary shall be commingled with any bank account of the Borrower or any of
its Subsidiaries. Any financial statements distributed to any creditors of any
Unrestricted Subsidiary shall clearly establish or indicate the Company
separateness of such Unrestricted Subsidiary from the Borrower and its
Subsidiaries. Finally, neither the Borrower nor any of its Subsidiaries shall
take any action, or conduct its affairs in a manner, which is likely to result
in the Company existence of the Borrower or any of its Subsidiaries or
Unrestricted Subsidiaries being ignored, or in the assets and liabilities of the
Borrower or any of its Subsidiaries being substantively consolidated with those
of any other such Person or any Unrestricted Subsidiary in a bankruptcy,
reorganization or other insolvency proceeding.
8.17 Year 2000 Compliance. The Borrower will ensure that its
--------------------
Information Systems and Equipment are at all times after November 15, 1999 Year
2000 Compliant in all material respects, and shall notify the Administrative
Agent and each Bank promptly upon detecting any failure of the Information
Systems and Equipment to be Year 2000 Compliant. In addition, the Borrower
shall provide the Administrative Agent and each Bank with such information about
its year 2000 computer readiness (including, without limitation, information as
to contingency plans, budgets and testing results) as the Administrative Agent
or such Bank shall reasonably request.
8.18 338(h)(10) Election. The Borrower will timely file or shall
--------------------
cause to be timely filed all forms required to be filed to effect a valid
election under Section 338(h)(10) of the Code with respect to the
Recapitalization, and the Borrower will timely satisfy or will cause to be
timely satisfied any requirements imposed by any state or local government to
give effect to an election analogous to the foregoing Section 338(h)(10)
election for all applicable state or local tax purposes.
8.19 Name Change. Immediately after giving effect to the Pacer
------------
Logistics Acquisition, the Borrower shall cause an amendment to the Certificate
of Incorporation of Pacer
<PAGE>
Logistics to be filed with the Secretary of State of the State of Delaware,
which amendment shall change the name of Pacer Logistics from "Pacer
International, Inc." to "Pacer Logistics, Inc."
SECTION 9. Negative Covenants. The Borrower hereby covenants and
------------------
agrees that as of the Initial Borrowing Date and thereafter for so long as this
Agreement is in effect and until the Total Commitment has terminated, no Letters
of Credit or Notes are outstanding and the Loans, together with interest, Fees
and all other Obligations (other than any indemnities described in Section 13.13
which are not then due and payable) incurred hereunder, are paid in full:
9.01 Changes in Business. (a) The Borrower will not, and will not
-------------------
permit any of its Subsidiaries to, engage directly or indirectly in any business
other than a Permitted Business.
(b) No Unrestricted Subsidiary shall engage (directly or indirectly)
in any business other than a Permitted Business.
9.02 Consolidation; Merger; Sale or Purchase of Assets; etc. The
-------------------------------------------------------
Borrower will not, nor will the Borrower permit any of its Subsidiaries to, wind
up, liquidate or dissolve its affairs or enter into any transaction of merger,
amalgamation or consolidation, or convey, sell, lease or otherwise dispose of
all or any part of its property or assets (other than inventory in the ordinary
course of business), or enter into any sale-leaseback transactions, or purchase
or otherwise acquire (in one or a series of related transactions) any part of
the property or assets (other than purchases or other acquisitions of inventory,
materials, general intangibles, equipment, goods and services in the ordinary
course of business) of any Person or agree to do any of the foregoing at any
future time, except that the following shall be permitted:
(a) the Borrower and its Subsidiaries may, as lessee, enter into
operating leases in the ordinary course of business with respect to real,
personal, movable or immovable property;
(b) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 9.11;
(c) Investments permitted pursuant to Section 9.05 and the
disposition or liquidation of Cash Equivalents in the ordinary course of
business;
(d) the Borrower and any of its Subsidiaries may sell or otherwise
dispose of assets (excluding capital stock of, or other equity interests
in, Subsidiaries, Joint Ventures and Unrestricted Subsidiaries) which, in
the reasonable opinion of such Person, are obsolete, uneconomic or no
longer useful in the conduct of such Person's business, provided that
--------
except with respect to asset dispositions or transfers arising out of, or
in connection with, the events described in clauses (i) and (ii) of the
definition of Recovery Event, (w) each such sale or disposition shall be
for an amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the Borrower), (x) to the
extent any such sale or disposition generates Net Sale Proceeds equal to or
greater than $250,000, such sale or disposition (I) results in
consideration at
<PAGE>
least 80% of which (taking into account the amount of cash, the principal
amount of any promissory notes and the fair market value, as determined by
the Borrower in good faith, of any other consideration) shall be in the
form of cash or (II) in the case of an asset or assets subject to
Capitalized Lease Obligations, results in the assumption of all of the
Capitalized Lease Obligations or other purchase money obligations of the
Borrower or such Subsidiary in respect of such asset by the purchaser
thereof, (y) the aggregate Net Sale Proceeds from all assets sold or
otherwise disposed of pursuant to this clause (d), when added to the
aggregate amount of all Capitalized Lease Obligations and all other
purchase money obligations assigned in connection with all assets sold or
otherwise disposed of pursuant to this clause (d) shall not exceed
$10,000,000 in the aggregate in any fiscal year of the Borrower and (z) in
the case of any sale or disposition of an asset constituting an Asset Sale,
the Net Sale Proceeds therefrom are either applied to repay Term Loans
and/or reduce the Total Revolving Loan Commitment as provided in Section
4.02(c) or reinvested in replacement assets or retained to the extent
permitted by Section 4.02(c) and/or the other relevant provisions of this
Agreement;
(e) any Subsidiary of the Borrower may convey, lease, license, sell
or otherwise transfer all or any part of its business, properties and
assets to the Borrower or to any Subsidiary Guarantor, so long as any
security interests granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security Documents in the assets so
transferred shall remain in full force and effect and perfected (to at
least the same extent as in effect immediately prior to such transfer) and
all actions required to maintain said perfected status have been taken;
(f) any Subsidiary of the Borrower may merge with and into, or be
dissolved or liquidated into, the Borrower or any Subsidiary Guarantor, so
long as (i) the Borrower or such Subsidiary Guarantor is the surviving
corporation of any such merger, dissolution or liquidation and (ii) any
security interests granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security Documents in the assets of such
Subsidiary shall remain in full force and effect and perfected (to at least
the same extent as in effect immediately prior to such merger, dissolution
or liquidation) and all actions required to maintain said perfected status
have been taken;
(g) any Foreign Subsidiary may be merged or amalgamated with and
into, or be dissolved or liquidated into, or transfer any of its assets to,
any Wholly-Owned Foreign Subsidiary of the Borrower, so long as (i) such
Wholly-Owned Foreign Subsidiary is the surviving corporation of any such
merger, amalgamation, dissolution or liquidation and (ii) any security
interests granted to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Security Documents in the assets of such Wholly-
Owned Foreign Subsidiary and such Foreign Subsidiary shall remain in full
force and effect and perfected (to at least the same extent as in effect
immediately prior to such merger, amalgamation, dissolution, liquidation or
transfer) and all actions required to maintain said perfected status have
been taken;
<PAGE>
(h) the Borrower and its Wholly-Owned Domestic Subsidiaries shall be
permitted to make Permitted Acquisitions, so long as such Permitted
Acquisitions are effected in accordance with the requirements of Section
8.14;
(i) the Recapitalization, the Pacer Logistics Acquisition and the
Sale-Leaseback Transaction shall be permitted to the extent consummated in
accordance with the relevant requirements of Section 5.08 of this
Agreement;
(j) the Borrower and its Subsidiaries may, in the ordinary course of
business, license, as licensor or licensee, patents, trademarks, copyrights
and know-how to or from third Persons or one another, so long as any such
license by the Borrower or any of its Subsidiaries in its capacity as
licensor is permitted to be assigned pursuant to the Security Agreement (to
the extent that a security interest in such patents, trademarks, copyrights
and know-how is granted thereunder) and does not otherwise prohibit the
granting of a Lien by the Borrower or any of its Subsidiaries pursuant to
the Security Agreement in the intellectual property covered by such
license;
(k) the Borrower and its Domestic Subsidiaries may transfer assets
to Wholly-Owned Foreign Subsidiaries, so long as (x) no Default or Event of
Default exists as the time of the respective transfer and (y) the aggregate
fair market value of all such assets so transferred (determined in good
faith by the Board of Directors or senior management of the Borrower) to
all such Foreign Subsidiaries on and after the Effective Date does not
exceed the sum of (i) $7,500,000 plus (ii) the aggregate fair market value
----
of all assets of Foreign Subsidiaries of the Borrower (as determined in
good faith by senior management of the Borrower) transferred by such
Foreign Subsidiaries to the Borrower and any Subsidiary Guarantor pursuant
to Section 9.02(e) after the Effective Date;
(l) the Borrower and any of its Subsidiaries may sell or otherwise
dispose of the capital stock of, or other equity interests in, any of their
respective Subsidiaries, Joint Ventures and Unrestricted Subsidiaries,
provided that (v) in the case of a sale or other disposition of the capital
--------
stock or other equity interests of any Wholly-Owned Subsidiary of the
Borrower, 100% of the capital stock or other equity interests of such
Subsidiary shall be so sold or disposed of, (w) each such sale or
disposition shall be for an amount at least equal to the fair market value
thereof (as determined in good faith by senior management of the Borrower),
(x) each such sale results in consideration at least 80% of which (taking
into account the amount of cash, the principal amount of any promissory
notes and the fair market value, as determined by the Borrower in good
faith, of any other consideration) shall be in the form of cash, (y) the
aggregate Net Sale Proceeds of all assets sold or otherwise disposed of
pursuant to this clause (l) after the Effective Date shall not exceed
$15,000,000 in the aggregate and (z) the Net Sale Proceeds therefrom are
either applied to repay Term Loans and/or reduce the Total Revolving Loan
Commitment as provided in Section 4.02(c) or reinvested in replacement
assets or retained to the extent permitted by Section 4.02(c) and/or the
other relevant provisions of this Agreement;
<PAGE>
(m) the Borrower and its Subsidiaries may enter into agreements to
effect acquisitions and dispositions of stock or assets, so long as the
respective transaction is permitted pursuant to the provisions of this
Section 9.02; provided that the Borrower and its Subsidiaries may enter
--------
into agreements to effect acquisitions and dispositions of capital stock or
assets in transactions not permitted by the provisions of this Section 9.02
at the time the respective agreement is entered into, so long as in the
case of each such agreement, such agreement shall be expressly conditioned
upon obtaining the requisite consent of the Required Banks under this
Agreement or the repayment of all Obligations hereunder as a condition
precedent to the consummation of the respective transaction and, if for any
reason the transaction is not consummated because of a failure to obtain
such consent, the aggregate liability of the Borrower and its Subsidiaries
under any such agreement shall not exceed $2,500,000; and
(n) the Borrower or any of its Subsidiaries may effect Permitted
Sale-Leaseback Transactions in accordance with the definition thereof;
provided that (x) the aggregate amount of all proceeds received by the
--------
Borrower and its Subsidiaries from all Permitted Sale-Leaseback
Transactions consummated on and after the Effective Date shall not exceed
$15,000,000 and (y) the Net Sale Proceeds therefrom are applied to repay
Term Loans and/or reduce the Total Revolving Loan Commitment as provided in
Section 4.02(c) or reinvested in replacement assets or retained to the
extent permitted by Section 4.02(c).
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 9.02, such Collateral
(unless transferred to the Borrower or a Subsidiary thereof) shall (except as
otherwise provided above) be sold or otherwise disposed of free and clear of the
Liens created by the Security Documents and the Administrative Agent shall take
such actions (including, without limitation, directing the Collateral Agent to
take such actions) as are appropriate in connection therewith.
9.03 Liens. The Borrower will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible, movable or immovable) of the Borrower or any of its Subsidiaries,
whether now owned or hereafter acquired, or sell any such property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable or notes with
recourse to the Borrower or any of its Subsidiaries) or assign any right to
receive income, except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP;
<PAGE>
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', materialmen's, warehousemen's and mechanics'
Liens, statutory and common law landlord's Liens, and other similar Liens
arising in the ordinary course of business, and which either (x) do not in
the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of
the Borrower or any of its Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset subject to such
Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Schedule IX, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees, awards or attachments in
circumstances not constituting an Event of Default under Section 10.09,
provided that the amount of cash and property (determined on a fair market
--------
value basis) deposited or delivered to secure the respective judgment or
decree or subject to attachment shall not exceed $5,000,000 at any time;
(f) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business of the Borrower and its
Subsidiaries in connection with workers' compensation, unemployment
insurance and other types of social security, (y) to secure the performance
by the Borrower and its Subsidiaries of tenders, statutory obligations
(other than excise taxes), surety, stay, customs and appeal bonds,
statutory bonds, bids, leases, government contracts, trade contracts,
performance and return of money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) or (z) to
secure the performance by the Borrower and its Subsidiaries of leases of
Real Property, to the extent incurred or made in the ordinary course of
business consistent with past practices, provided that the aggregate amount
--------
of deposits at any time pursuant to sub-clauses (y) and (z) above shall not
exceed $5,000,000 in the aggregate;
(g) licenses, sublicenses, leases or subleases granted to third
Persons in the ordinary course of business not interfering in any material
respect with the business of the Borrower or any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title, encroachments and other similar charges or
encumbrances, in each case not securing Indebtedness and not interfering in
any material respect with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
<PAGE>
(i) Liens arising from precautionary UCC financing statements
regarding operating leases;
(j) Liens created pursuant to Capital Leases permitted pursuant to
Section 9.04(d), provided that (x) such Liens only serve to secure the
--------
payment of Indebtedness arising under such Capitalized Lease Obligation
(and other Indebtedness permitted by Section 9.04(d) and incurred from the
same Person as such Indebtedness) and (y) the Lien encumbering the asset
giving rise to the Capitalized Lease Obligation does not encumber any other
asset of the Borrower or any of its Subsidiaries (other than other assets
subject to Capitalized Lease Obligations and/or Indebtedness incurred
pursuant to Section 9.04(d), in each case owing to the same Person as such
Capitalized Lease Obligation);
(k) Permitted Encumbrances;
(l) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Effective Date, provided that (i)
--------
any such Liens attach only to the assets so purchased, upgrades thereon
and, if the asset so purchased is an upgrade, the original asset itself
(and such other assets financed by the same financing source), (ii) the
Indebtedness (other than Indebtedness incurred from the same financing
source to purchase other assets and excluding Indebtedness representing
obligations to pay installation and delivery charges for the property so
purchased) secured by any such Lien does not exceed 100%, nor is less than
80%, of the lesser of the fair market value or the purchase price of the
property being purchased at the time of the incurrence of such Indebtedness
and (iii) the Indebtedness secured thereby is permitted to be incurred
pursuant to Section 9.04(d);
(m) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
--------
Liens is permitted to exist under Section 9.04(d), and (ii) such Liens are
not incurred in connection with, or in contemplation or anticipation of,
such Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries;
(n) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Borrower or any of its Subsidiaries in
the ordinary course of business; and
(o) additional Liens incurred by the Borrower and its Subsidiaries,
so long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed
$5,000,000.
9.04 Indebtedness. The Borrower will not, and will not permit any of
------------
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
<PAGE>
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Schedule IV (as reduced by any repayments thereof before, on
or after the Initial Borrowing Date), without giving effect to any
subsequent extension, renewal or refinancing thereof;
(c) Indebtedness under (i) Interest Rate Protection Agreements
entered into to protect the Borrower against fluctuations in interest rates
in respect of Indebtedness otherwise permitted under this Agreement or (ii)
Other Hedging Agreements providing protection against fluctuations in
currency values in connection with the Borrower's or any of its
Subsidiaries' operations, so long as management of the Borrower or such
Subsidiary, as the case may be, has determined that the entering into of
any such Other Hedging Agreement is a bona fide hedging activity (and is
not for speculative purposes) and is in the ordinary course of business and
consistent with its past practices;
(d) (x) Indebtedness of a Subsidiary acquired pursuant to a
Permitted Acquisition (or Indebtedness assumed by the Borrower or any
Wholly-Owned Domestic Subsidiary pursuant to a Permitted Acquisition as a
result of a merger or consolidation or the acquisition of an asset securing
such Indebtedness) (the "Permitted Acquired Debt"), so long as (i) such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition and (ii) such Indebtedness
does not constitute debt for borrowed money (except to the extent such
Indebtedness cannot be repaid in accordance with its terms at the time of
its assumption pursuant to such Permitted Acquisition (without the payment
of a penalty or premium) and the aggregate principal amount of all such
Indebtedness for borrowed money permitted pursuant to this parenthetical
does not exceed $15,000,000), it being understood and agreed that
Capitalized Lease Obligations and purchase money Indebtedness shall not
constitute debt for borrowed money for purposes of this clause (ii) and (y)
Capitalized Lease Obligations and Indebtedness of the Borrower and its
Subsidiaries representing purchase money Indebtedness secured by Liens
permitted pursuant to Section 9.03(l), provided, that the sum of (I) the
--------
aggregate principal amount of all Permitted Acquired Debt at any time
outstanding plus (II) the aggregate amount of Capitalized Lease Obligations
----
incurred on and after the Initial Borrowing Date and outstanding at any
time (including Indebtedness evidenced by Capitalized Lease Obligations
arising from Permitted Sale-Leaseback Transactions) plus (III) the
----
aggregate principal amount of all such purchase money Indebtedness incurred
on and after the Initial Borrowing Date and outstanding at any time, shall
not exceed $20,000,000;
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 9.05(f);
<PAGE>
(f) Permitted Subordinated Refinancing Indebtedness, so long as no
Default or Event of Default is in existence at the time of any incurrence
thereof and immediately after giving effect thereto;
(g) unsecured Indebtedness of the Borrower and the Subsidiary
Guarantors incurred under the Senior Subordinated Notes and the other
Senior Subordinated Notes Documents in an aggregate principal amount not to
exceed $150,000,000 less the amount of any repayments of principal thereof
----
after the Initial Borrowing Date;
(h) Indebtedness of the Borrower or any of its Subsidiaries which
may be deemed to exist in connection with agreements providing for
indemnification, purchase price adjustments and similar obligations in
connection with acquisitions or sales of assets and/or businesses effected
in accordance with the requirements of this Agreement (so long as any such
obligations are those of the Person making the respective acquisition or
sale, and are not guaranteed by any other Person);
(i) Contingent Obligations of (x) the Borrower or any of its
Subsidiaries as a guarantor of the lessee under any lease pursuant to which
the Borrower or any of its Wholly-Owned Subsidiaries is the lessee so long
as such lease is otherwise permitted hereunder, (y) the Borrower or any of
its Subsidiaries as a guarantor of any Capitalized Lease Obligation to
which a Joint Venture is a party or any contract entered into by such Joint
Venture in the ordinary course of business; provided that the maximum
--------
liability of the Borrower or any of its Subsidiaries in respect of any
obligations as described pursuant to preceding clause (y) is permitted as
an Investment on such date pursuant to the requirements of Section 9.05(l)
and (z) the Borrower which may be deemed to exist pursuant to acquisition
agreements entered into in connection with Permitted Acquisitions
(including any obligation to pay the purchase price therefor and any
indemnification, purchase price adjustment and similar obligations);
(j) Indebtedness with respect to performance bonds, surety bonds,
appeal bonds or customs bonds required in the ordinary course of business
or in connection with the enforcement of rights or claims of the Borrower
or any of its Subsidiaries or in connection with judgments that do not
result in a Default or an Event of Default, provided that the aggregate
--------
outstanding amount of all such performance bonds, surety bonds, appeal
bonds and customs bonds permitted by this subsection (j) shall not at any
time exceed $5,000,000;
(k) Indebtedness of the Borrower under the Shareholder Subordinated
Notes issued after the Effective Date in connection with a redemption or
repurchase of Borrower Common Stock pursuant to Section 9.06(ii); and
(l) (x) Permitted Subordinated Indebtedness incurred in accordance
with the requirements of the definition thereof and (y) additional
unsecured Indebtedness of the Borrower and its Subsidiaries not otherwise
permitted pursuant to this Section 9.04, so long as the aggregate principal
amount of all Indebtedness permitted by this clause (l), when added to the
aggregate liquidation preference for all Disqualified Preferred Stock
<PAGE>
issued after the Initial Borrowing Date pursuant to Section 9.13(c), does
not exceed $25,000,000 at any time outstanding.
9.05 Advances; Investments; Loans. The Borrower will not, and will
----------------------------
not permit any of its Subsidiaries to, lend money or extend credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, or purchase or own a futures contract or otherwise become liable for
the purchase or sale of currency or other commodities at a future date in the
nature of a futures contract, or hold any cash or Cash Equivalents (any of the
foregoing, an "Investment"), except:
(a) the Borrower and its Subsidiaries may invest in cash and Cash
Equivalents, provided that during any time that (i) Revolving Loans or
--------
Swingline Loans are outstanding and (ii) the Total Revolving Loan
Commitment exceeds $40,000,000, the aggregate amount of cash and Cash
Equivalents held by the Borrower and its Subsidiaries shall not exceed
$10,000,000 for any period of three consecutive Business Days;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms (including the dating of receivables) of the Borrower or such
Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations and equity securities) received in
connection with the bankruptcy or reorganization of suppliers and customers
and in settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(d) Interest Rate Protection Agreements and Other Hedging Agreements
entered into in compliance with Section 9.04(c) shall be permitted;
(e) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Schedule VI shall be permitted, without giving
effect to any additions thereto or replacements thereof, it being
understood that any additional Investments made with respect to such
existing Investments shall be permitted only if independently justified
under the other provisions of this Section 9.05;
(f) any Credit Party may make intercompany loans and advances to any
other Credit Party and any Foreign Subsidiary (collectively, "Intercompany
Loans"), provided, that (w) at no time shall the aggregate outstanding
--------
principal amount of all Intercompany Loans made pursuant to this clause (f)
by the Credit Parties to Foreign Subsidiaries, when added to the amount of
contributions, capitalizations and forgivenesses theretofore made pursuant
to Section 9.05(p), exceed $10,000,000 (determined without regard to any
write-downs or write-offs of such loans and advances), (x) each
Intercompany Loan shall be evidenced by an Intercompany Note and (y) each
such Intercompany Note shall be pledged to the Collateral Agent pursuant to
the Pledge Agreement;
<PAGE>
(g) loans and advances by the Borrower and its Subsidiaries to
employees of the Borrower and its Subsidiaries in connection with
relocations, purchases by such employees of Borrower Common Stock or
options or similar rights to purchase Borrower Common Stock and other
ordinary course of business purposes (including travel and entertainment
expenses) shall be permitted, so long as the aggregate principal amount
thereof at any time outstanding (determined without regard to any write-
downs or write-offs of such loans and advances) shall not exceed
$5,000,000;
(h) the Borrower may acquire and hold obligations of one or more
officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
Borrower Common Stock, so long as no cash is actually advanced by the
Borrower or any of its Subsidiaries to such officers or employees in
connection with the acquisition of any such obligations;
(i) the Recapitalization and the Pacer Logistics Acquisition shall
be permitted to be consummated in accordance with the requirements of
Section 5.08;
(j) the Borrower and any of its Wholly-Owned Domestic Subsidiaries
may make Permitted Acquisitions in accordance with the relevant
requirements of Section 8.14 and the component definitions as used therein;
(k) the Borrower and its Subsidiaries may own the capital stock of
their respective Subsidiaries created or acquired in accordance with the
terms of this Agreement (so long as all amounts invested in such
Subsidiaries are independently justified under another provision of this
Section 9.05);
(l) so long as no Default or Event of Default exists or would exist
immediately after giving effect to the respective Investment, the Borrower
and its Wholly-Owned Domestic Subsidiaries shall be permitted to make
Investments in any Joint Venture or any Unrestricted Subsidiary on any date
in an amount not to exceed the Available Basket Amount on such date (after
giving effect to all prior and contemporaneous adjustments thereto, except
as a result of such Investment), it being understood and agreed that (i) to
the extent the Borrower or one or more other Credit Parties (after the
respective Investment has been made) receives a cash return from the
respective Joint Venture or Unrestricted Subsidiary of amounts previously
invested pursuant to this clause (l) (which cash return may be made by way
of repayment of principal in the case of loans and cash equity returns
(whether as a distribution, dividend or redemption) in the case of equity
investments) or a return in the form of an asset distribution from the
respective Joint Venture or Unrestricted Subsidiary of any asset previously
contributed pursuant to this clause (l), then the amount of such cash
return of investment or the fair market value of such distributed asset (as
determined in good faith by senior management of the Borrower), as the case
may be, shall, upon the Administrative Agent's receipt of a certification
of the amount of the return of investment from an Authorized Officer, apply
to increase the Available Basket Amount, provided that the aggregate amount
--------
of increases to the Available Basket Amount described above shall not
exceed the amount of
<PAGE>
returned investment and, in no event, shall the amount of the increases
made to the Available Basket Amount in respect of any Investment exceed the
amount previously invested pursuant to this clause (l);
(m) the Borrower and its Subsidiaries may receive and hold
promissory notes and other non-cash consideration received in connection
with any asset sale permitted by Sections 9.02(d) and (l);
(n) the Borrower and its Subsidiaries may convey, lease, license,
sell or otherwise transfer or acquire assets and properties to the extent
permitted by Sections 9.02(e), (f), (g), (k) and (n);
(o) the Borrower and its Subsidiaries may make advances in the form
of a prepayment of expenses, so long as such expenses were incurred in the
ordinary course of business and are being paid in accordance with customary
trade terms of the Borrower or such Subsidiary;
(p) the Borrower and its Domestic Subsidiaries may make cash capital
contributions to Foreign Subsidiaries, and may capitalize or forgive any
Indebtedness owed to them by a Foreign Subsidiary and outstanding under
clause (f) of this Section 9.05, provided that the aggregate amount of such
--------
contributions, capitalizations and forgiveness on and after the Initial
Borrowing Date, when added to the aggregate outstanding principal amount of
Intercompany Loans made to Foreign Subsidiaries under such clause (f)
(determined without regard to any write-downs or write-offs thereof) shall
not exceed an amount equal to $10,000,000;
(q) the Borrower and any Subsidiary Guarantor may make cash equity
contributions to any Subsidiary Guarantor; and
(r) in addition to investments permitted by clauses (a) through (q)
of this Section 9.05, the Borrower and its Subsidiaries may make additional
loans, advances and other Investments to or in a Person in an aggregate
amount for all loans, advances and other Investments made pursuant to this
clause (r) (determined without regard to any write-downs or write-offs
thereof), net of cash repayments of principal in the case of loans, sale
proceeds in the case of Investments in the form of debt instruments and
cash equity returns (whether as a distribution, dividend, redemption or
sale) in the case of equity investments, not to exceed $15,000,000 at any
time outstanding.
9.06 Dividends; etc. The Borrower will not, and will not permit any
---------------
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock of the Borrower or any such Subsidiary, as the
case may be) or return any capital to, its stockholders or authorize or make any
other distribution, payment or delivery of property or cash to its stockholders
as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any shares of any class of its capital stock,
now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and the Borrower will not permit any of its
<PAGE>
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Borrower or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
(i) any Subsidiary of the Borrower may pay Dividends to the Borrower
or any Subsidiary Guarantor;
(ii) the Borrower may redeem or purchase shares of Borrower Common
Stock or options to purchase Borrower Common Stock, as the case may be,
held by former employees of the Borrower or any of its Subsidiaries
following the termination of their employment (by death, disability or
otherwise), provided that (x) the only consideration paid by the Borrower
--------
in respect of such redemptions and/or purchases shall be cash, forgiveness
of liabilities and/or Shareholder Subordinated Notes, (y) the sum of (A)
the aggregate amount paid by the Borrower in cash in respect of all such
redemptions and/or purchases plus (B) the aggregate amount of liabilities
so forgiven and (C) the aggregate amount of all cash principal and interest
payments made on Shareholder Subordinated Notes, in each case after the
Initial Borrowing Date, shall not exceed $5,000,000, and (z) at the time of
any cash payment or forgiveness of liabilities permitted to be made
pursuant to this Section 9.06(ii), including any cash payment under a
Shareholder Subordinated Note, no Default or Event of Default shall then
exist or result therefrom;
(iii) so long as no Default or Event of Default exists or would
result therefrom, the Borrower may pay regularly accruing cash Dividends on
Disqualified Preferred Stock issued pursuant to Section 9.13(c), with such
Dividends to be paid in accordance with the terms of the respective
certificate of designation therefor;
(iv) any Subsidiary of the Borrower that is not a Wholly-Owned
Subsidiary may pay cash Dividends to its shareholders or partners
generally, so long as the Borrower or its respective Subsidiary which owns
the equity interest or interests in the Subsidiary paying such Dividends
receives at least its proportionate share thereof (based upon its relative
holdings of equity interest in the Subsidiary paying such Dividends and
taking into account the relative preferences, if any, of the various
classes of equity interests in such Subsidiary or the terms of any
agreements applicable thereto);
(v) the Recapitalization shall be permitted; and
(vi) Pacer Logistics may pay regularly accruing Dividends with
respect to Pacer Logistics Preferred Stock through the issuance of
additional shares of Pacer Logistics Preferred Stock in accordance with the
terms of the relevant Equity Financing Documents governing the same;
(vii) to the extent the issuance of Borrower Exchange PIK Preferred
Stock or Borrower Common Stock in exchange for Pacer Logistics Preferred
Stock may be deemed to constitute a Dividend, same shall be permitted so
long as (x) in the case of any such issuance of Borrower Exchange PIK
Preferred Stock, any such issuance (and
<PAGE>
exchange) is consummated in accordance (and consistent) with the
requirements of Section 9.13(e) and (y) in the case of any issuance of
Borrower Common Stock, any such issuance (and exchange) is consummated in
accordance with (and consistent) with the requirements of the relevant
Equity Financing Documents governing the Pacer Logistics Preferred Stock;
(viii) on and after the issuance of Borrower Exchange PIK Preferred
Stock in accordance with the requirements of Section 9.13(e), the Borrower
may pay regularly accruing Dividends with respect thereto through the
issuance of additional shares of Borrower Exchange PIK Preferred Stock in
accordance with the terms of the Borrower Exchange PIK Preferred Stock
Documents governing the same; and
(ix) the Borrower may pay regularly accruing Dividends with respect
to Qualified Preferred Stock through the issuance of additional shares of
Qualified Preferred Stock (but not in cash) in accordance with the terms of
the documentation governing the same.
9.07 Transactions with Affiliates and Unrestricted Subsidiaries.
----------------------------------------------------------
The Borrower will not, and will not permit any of its Subsidiaries to, enter
into any transaction or series of transactions with any Affiliate of the
Borrower or any of its Subsidiaries or any of its Unrestricted Subsidiaries
other than on terms and conditions substantially as favorable to the Borrower or
such Subsidiary as would be reasonably expected to be obtainable by the Borrower
or such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an Affiliate; provided, that the following shall in any event
--------
be permitted: (i) the Transaction; (ii) intercompany transactions among the
Borrower and its Subsidiaries to the extent expressly permitted by Sections
9.02, 9.04, 9.05 and 9.06 shall be permitted; (iii) so long as no Default or
Event of Default is then in existence or would result therefrom, the payment, on
a quarterly basis, of management fees to Apollo Group in an aggregate amount not
to exceed $125,000 in any fiscal quarter of the Borrower pursuant to, and in
accordance with the terms of, the Apollo Management Agreement, provided that if
--------
during any fiscal quarter of the Borrower, a Default or Event of Default is in
existence and such management fees cannot be paid as provided above, such fees
shall continue to accrue and may be paid at such time as all Defaults and Events
of Default have been cured or waived and so long as no Default or Event of
Default will exist immediately after giving effect to the payment thereof; (iv)
customary fees to non-officer directors of the Borrower and its Subsidiaries;
(v) the Borrower and its Subsidiaries may enter into employment arrangements
with respect to the procurement of services with their respective officers and
employees in the ordinary course of business; (vi) the payment on the Initial
Borrowing Date of one time consulting and advisory fees to Apollo Group in an
aggregate amount not to exceed $1,500,000; (vii) the reimbursement of Apollo
Group for its reasonable out-of-pocket expenses incurred in connection with
performing management services to the Borrower and its Subsidiaries pursuant to
the Apollo Management Agreement or in connection with the Transaction; (viii) so
long as no Default or Event of Default is then in existence or would result
therefrom, the payment to Apollo Group of merger advisory fees for each
Permitted Acquisition in an amount not to exceed 1% of the fair market value of
the business or assets acquired pursuant to such Permitted Acquisition
(determined in good faith by senior
<PAGE>
management of the Borrower); and (ix) the payment of consulting, management or
other fees to the Borrower or any Subsidiary Guarantor by any of their
respective Subsidiaries in the ordinary course of business. In no event shall
any management, consulting or similar fee be paid or payable by the Borrower or
any of its Subsidiaries to any Person except as specifically provided in this
Section 9.07.
9.08 Designated Senior Debt. The Borrower shall not designate any
----------------------
Indebtedness (other than the Obligations) as "Designated Senior Debt" (as
defined in the Senior Subordinated Notes Indenture and, on and after the
execution and delivery thereof, any agreement relating to Permitted Subordinated
Indebtedness and Permitted Subordinated Refinancing Indebtedness).
9.09 Consolidated Interest Coverage Ratio. The Borrower will not
------------------------------------
permit the Consolidated Interest Coverage Ratio for any Test Period ending on
the last day of any fiscal quarter of the Borrower specified below to be less
than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ended Closest to Ratio
------------------------------- -----
September 30, 1999 1.75:1.0
December 31, 1999 1.75:1.0
March 31, 2000 1.75:1.0
June 30, 2000 1.75:1.0
September 30, 2000 1.75:1.0
December 31, 2000 1.75:1.0
March 31, 2001 1.90:1.0
June 30, 2001 1.90:1.0
September 30, 2001 1.90:1.0
December 31, 2001 1.90:1.0
March 31, 2002 2.00:1.0
June 30, 2002 2.00:1.0
September 30, 2002 2.00:1.0
December 31, 2002 2.00:1.0
March 31, 2003 2.10:1.0
June 30, 2003 2.10:1.0
September 30, 2003 2.10:1.0
December 31, 2003 2.10:1.0
March 31, 2004 2.25:1.0
June 30, 2004 2.25:1.0
September 30, 2004 2.25:1.0
December 31, 2004 2.25:1.0
March 31, 2005 2.25:1.0
June 30, 2005 2.25:1.0
September 30, 2005 2.25:1.0
December 31, 2005 2.25:1.0
March 31, 2006 2.25:1.0
<PAGE>
Notwithstanding anything to the contrary contained in this Agreement, all
calculations of compliance with this Section 9.09 shall be made on a Pro Forma
--- -----
Basis.
9.10 Adjusted Total Leverage Ratio. The Borrower will not permit the
-----------------------------
Adjusted Total Leverage Ratio on the last day of any fiscal quarter specified
below to exceed the respective ratio set forth opposite such fiscal quarter
below:
Fiscal Quarter Ended Closest to Ratio
------------------------------- -----
September 30, 1999 5.50:1.0
December 31, 1999 5.50:1.0
March 31, 2000 5.50:1.0
June 30, 2000 5.50:1.0
September 30, 2000 5.50:1.0
December 31, 2000 5.50:1.0
March 31, 2001 5.25:1.0
June 30, 2001 5.25:1.0
September 30, 2001 5.25:1.0
December 31, 2001 5.25:1.0
March 31, 2002 5.00:1.0
June 30, 2002 5.00:1.0
September 30, 2002 5.00:1.0
December 31, 2002 5.00:1.0
March 31, 2003 4.75:1.0
June 30, 2003 4.75:1.0
September 30, 2003 4.75:1.0
December 31, 2003 4.75:1.0
March 31, 2004 4.50:1.0
June 30, 2004 4.50:1.0
September 30, 2004 4.50:1.0
December 31, 2004 4.50:1.0
March 31, 2005 4.50:1.0
June 30, 2005 4.50:1.0
September 30, 2005 4.50:1.0
December 31, 2005 4.50:1.0
March 31, 2006 4.50:1.0
Notwithstanding anything contrary contained above or elsewhere in this
Agreement, (i) all calculations of compliance with this Section 9.10 shall be
made on a Pro Forma Basis and (ii) in no event shall the Adjusted Total Leverage
--- -----
Ratio be greater than the Maximum Permitted Acquisition Leverage Ratio upon the
consummation of, and after giving effect on a Pro Forma Basis to, any Permitted
--- -----
Acquisition.
<PAGE>
9.11 Capital Expenditures. (a) The Borrower will not, and will not
--------------------
permit any of its Subsidiaries to, make any Capital Expenditures, except that
during any fiscal year set forth below, the Borrower and its Subsidiaries may
make Capital Expenditures, so long as the aggregate amount of such Capital
Expenditures does not exceed in any fiscal year set forth below the sum of (x)
the amount set forth opposite such fiscal year below plus (y) for each Acquired
----
Business acquired after the Effective Date and prior to the first day of the
respective fiscal year set forth below, 25% of the Acquired EBITDA of such
Acquired Business for the trailing twelve months of such Acquired Business
immediately preceding its acquisition for which financial statements have been
made available to the Borrower and the Banks plus (z) for each Acquired Business
----
acquired during the respective fiscal year, the amount for such Acquired
Business specified in preceding clause (y) multiplied by a percentage, the
numerator of which is the number of days in the fiscal year after the date of
the respective acquisition and the denominator of which is 365 or 366, as the
case may be:
Fiscal Year Ending Amount
------------------ ------
December 31, 1999 $5,000,000
December 31, 2000 $5,500,000
December 31, 2001 $6,000,000
December 31, 2002 $6,500,000
December 31, 2003 $7,000,000
December 31, 2004 $7,500,000
December 31, 2005 $8,000,000
December 31, 2006 $4,250,000
(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any fiscal year (before giving effect to any
increase in such permitted expenditure amount pursuant to this clause (b)) is
greater than the amount of such Capital Expenditures made by the Borrower and
its Subsidiaries during such fiscal year, such excess (the "Rollover Amount")
may be carried forward and utilized to make Capital Expenditures in succeeding
fiscal years, provided that in no event shall the Rollover Amount available to
--------
be utilized in succeeding fiscal years exceed $5,000,000 at any time.
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the insurance proceeds
received by the Borrower or any of its Subsidiaries from any Recovery Event so
long as such Capital Expenditures are used to replace or restore any properties
or assets in respect of which such proceeds were paid or committed to be paid
within 360 days following the date of the receipt of such insurance proceeds, in
each case to the extent such insurance proceeds do not require, or result in, a
mandatory repayment of Term Loans and/or a mandatory reduction to the Total
Revolving Loan Commitment pursuant to Section 4.02(f).
<PAGE>
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the Net Sale Proceeds
of Asset Sales, to the extent such Net Sale Proceeds do not require, or result
in, a mandatory repayment of Term Loans and/or a mandatory reduction to the
Total Revolving Loan Commitment pursuant to Section 4.02(c) and such proceeds
are reinvested as required by said Section 4.02(c).
(e) Notwithstanding the foregoing, the Borrower and its Wholly-Owned
Domestic Subsidiaries may make Capital Expenditures (which Capital Expenditures
will not be included in any determination under the foregoing clause (a))
constituting Permitted Acquisitions effected in accordance with the requirements
of Section 9.02(h).
(f) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures (which Capital Expenditures shall not be included in any
determination under foregoing clause (a)) pursuant to the Pacer Logistics
Acquisition to the extent same is effected in accordance with the requirements
of Section 5.08.
(g) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make additional Capital Expenditures (which Capital Expenditures will not be
included in any determination under foregoing clause (a)) consisting of IT
Upgrade Expenditures at any time and from time to time, so long as the aggregate
amount of such additional Capital Expenditures made by the Borrower and its
Subsidiaries pursuant to this clause (g) after the Effective Date does not
exceed $25,000,000 (it being understood that IT Upgrade Expenditures may exceed
the amounts set forth in this clause (g) so long as the Capital Expenditures
made in connection therewith are independently justified under clause (a) or (b)
above).
(h) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make additional Capital Expenditures (which Capital Expenditures will not be
included in any determination under foregoing clause (a)) consisting of
Container and Chassis Purchases at any time and from time to time, so long as
(i) the aggregate amount of such additional Capital Expenditures made by the
Borrower and its Subsidiaries pursuant to this clause (h) after the Effective
Date does not exceed $25,000,000 and (ii) the aggregate amount of such
additional Capital Expenditures made by the Borrower and its Subsidiaries
pursuant to this clause (h) in any fiscal year of the Borrower does not exceed
$10,000,000 (it being understood that Container and Chassis Purchases may exceed
the amounts set forth in this clause (h) so long as the Capital Expenditures
made in connection therewith are independently justified under clause (a) or (b)
above).
9.12 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
- --------------------------------------------------------------------------------
Other Agreements; Issuances of Capital Stock; etc. The Borrower will not, and
- -------------------------------------------------
will not permit any of its Subsidiaries to:
(i) amend or modify, or permit the amendment or modification of, any
provision of any Shareholder Subordinated Note, any Existing Indebtedness,
or, after the incurrence or issuance thereof, any Qualified Preferred
Stock, Pacer Logistics Preferred Stock, any Borrower Exchange PIK Preferred
Stock Document, Disqualified Preferred
<PAGE>
Stock or Permitted Debt or of any agreement (including, without limitation,
any purchase agreement, indenture, loan agreement, security agreement or
certificate of designation) relating thereto in a manner that could
reasonably be expected to in any way be adverse to the interests of the
Banks;
(ii) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption, repurchase or acquisition
for value of (including, without limitation, by way of depositing with the
trustee with respect thereto or any other Person money or securities before
due for the purpose of paying when due), or any prepayment or redemption as
a result of any asset sale, change of control or similar event of, any
Senior Subordinated Notes (except, in the case of the Senior Subordinated
Notes, through the issuance of Exchange Senior Subordinated Notes as
contemplated in the definition of Senior Subordinated Notes and consistent
with the requirements of the definition of Exchange Senior Subordinated
Notes), any Permitted Subordinated Refinancing Indebtedness or any
Permitted Subordinated Indebtedness; provided that, so long as no Default
--------
or Event of Default then exists or would result therefrom, (x) any Senior
Subordinated Notes may be refinanced with Permitted Subordinated
Refinancing Indebtedness, (y) the Borrower may repurchase Senior
Subordinated Notes on the open-market in an aggregate principal amount for
all purchases made pursuant to this clause (y) not to exceed $25,000,000 so
long as the Adjusted Total Leverage Ratio is less than 4.0:1.0 on the last
day of the Test Period most recently ended prior to the consummation of the
respective repurchase (as set forth in the officer's certificate most
recently delivered pursuant to Section 8.01(e)) and (z) the Borrower and
its Subsidiaries may make payments and prepayments in connection with
Existing Indebtedness;
(iii) make (or give any notice in respect of) any principal or
interest payment on, or any redemption or acquisition for value of, any
Shareholder Subordinated Note, except to the extent permitted by Section
9.06(ii);
(iv) amend or modify, or permit the amendment or modification of, any
provision of any Senior Subordinated Notes Document; or
(v) amend, modify or change in any way which could reasonably be
expected to be adverse to the interests of the Banks in any material
respect any Tax Allocation Agreement, any Management Agreement, any Equity
Financing Document, any Recapitalization Document, any Pacer Logistics
Acquisition Document, any APL Limited Agreement its certificate of
incorporation (including, without limitation, by the filing or modification
of any certificate of designation other than any certificates of
designation relating to Qualified Preferred Stock or Disqualified Preferred
Stock issued as permitted herein), by-laws, certificate of partnership,
partnership agreement, certificate of limited liability company, limited
liability company agreement or any agreement entered into by it, with
respect to its capital stock or other equity interest (including any
Shareholders' Agreement), or enter into any new Tax Allocation Agreement,
Management Agreement or agreement with respect to its capital stock or
other equity interest which could reasonably be expected to in any way be
adverse to the interests of
<PAGE>
the Banks or, in the case of any Management Agreement, which involves the
payment by the Borrower or any of its Subsidiaries of any amount which
could give rise to a violation of this Agreement; provided that the
--------
foregoing clause shall not restrict the ability of the Borrower and its
Subsidiaries to amend their respective certificates of incorporation to
authorize the issuance of capital stock otherwise permitted to be issued
pursuant to the terms of this Agreement.
9.13 Limitation on Issuance of Capital Stock. (a) The Borrower will
---------------------------------------
not, and will not permit any of its Subsidiaries to, issue (i) any Preferred
Stock (other than (x) Preferred Stock issued pursuant to clauses (c), (d) and
(e) below, (y) Pacer Logistics Preferred Stock issued on the Initial Borrowing
Date in accordance with the requirements of Section 5.08 and (z) the issuance of
shares of Pacer Logistics Preferred Stock in payment of regularly accruing
dividends on theretofore outstanding shares of Pacer Logistics Preferred Stock)
or any options, warrants or rights to purchase Preferred Stock or (ii) any
redeemable common stock unless, in either case, the issuance thereof is, and all
terms thereof are, satisfactory to the Required Banks in their sole discretion.
(b) The Borrower shall not permit any of its Subsidiaries to issue
any capital stock (including by way of sales of treasury stock) or any options
or warrants to purchase, or securities convertible into, capital stock, except
(i) for transfers and replacements of then outstanding shares of capital stock,
(ii) for stock splits, stock dividends and additional issuances which do not
decrease the percentage ownership of the Borrower or any of its Subsidiaries in
any class of the capital stock of such Subsidiaries, (iii) to qualify directors
to the extent required by applicable law, (iv) Subsidiaries formed after the
Initial Borrowing Date pursuant to Section 9.15 may issue capital stock in
accordance with the requirements of Section 9.15, (v) that Subsidiaries may
issue common stock to the Borrower and its Subsidiaries in connection with any
transaction permitted by Section 9.05(p) or (q) and (vi) that Pacer Logistics
may issue Pacer Logistics Preferred Stock in accordance with, and as
contemplated by, clauses (y) and (z) of the parenthetical contained in Section
9.13(a)(i). All capital stock issued in accordance with this Section 9.13(b)
shall, to the extent owned by any Credit Party and required by the Pledge
Agreement, be delivered to the Collateral Agent for pledge pursuant to the
Pledge Agreement.
(c) The Borrower may issue Disqualified Preferred Stock so long as
(i) no Default or Event of Default then exists or would exist immediately after
giving effect to the respective issuance, (ii) the aggregate liquidation
preference for all Disqualified Preferred Stock issued after the Initial
Borrowing Date pursuant to this Section 9.13(c) shall not to exceed, when
combined with the aggregate principal amount of all then outstanding
Indebtedness permitted by Section 9.04(l), $25,000,000, (iii) with respect to
each issue of Disqualified Preferred Stock, the gross cash proceeds therefrom
(or in the case of Disqualified Preferred Stock directly issued as consideration
for a Permitted Acquisition, the fair market value thereof (as determined in
good faith by the Borrower) of the assets received therefor) shall not exceed
the liquidation preference thereof at the time of issuance, (iv) calculations
are made by the Borrower of compliance with the covenants contained in Sections
9.09 and 9.10 for the Calculation Period most recently ended prior to the date
of the respective issuance of Disqualified Preferred Stock, on a Pro Forma Basis
--- -----
after giving effect to the respective issuance of Disqualified Preferred Stock,
and such
<PAGE>
calculations shall show that such financial covenants would have been complied
with if such issuance of Disqualified Preferred Stock had been consummated on
the first day of the respective Calculation Period, and (v) the Borrower shall
furnish to the Administrative Agent a certificate by an Authorized Officer of
the Borrower certifying to the best of his or her knowledge as to compliance
with the requirements of this Section 9.13(c) and containing the pro forma
--- -----
calculations required by the preceding clause (iv).
(d) The Borrower may issue Qualified Preferred Stock (x) in payment
of regularly accruing dividends on theretofore outstanding shares of Qualified
Preferred Stock as contemplated by Section 9.06(ix) and (y) so long as, with
respect to each other issue of Qualified Preferred Stock, the Borrower receives
reasonably equivalent consideration (as determined in good faith by the
Borrower).
(e) The Borrower may issue Borrower Exchange PIK Preferred Stock in
exchange for Pacer Logistics Preferred Stock pursuant to, and in accordance with
the terms of, the Borrower Exchange PIK Preferred Stock Documents and in
accordance with the terms of the relevant Equity Financing Documents governing
the Pacer Logistics Preferred Stock.
9.14 Limitation on Certain Restrictions on Subsidiaries. The
--------------------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective,
any encumbrance or restriction on the ability of any such Subsidiary to (x) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (y) make loans or advances to the Borrower or any Subsidiary of
the Borrower or (z) transfer any of its properties or assets to the Borrower or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) this Agreement and the other
Credit Documents, (iii) the provisions contained in the Existing Indebtedness,
(iv) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Borrower or a Subsidiary of the Borrower
entered into in the ordinary course of business and consistent with past
practices, (v) customary provisions restricting assignment of any contract
entered into by the Borrower or any Subsidiary of the Borrower in the ordinary
course of business, (vi) any agreement or instrument governing Permitted
Acquired Debt, which encumbrance or restriction is not applicable to any Person
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person acquired pursuant to the respective Permitted
Acquisition and so long as the respective encumbrances or restrictions were not
created (or made more restrictive) in connection with or in anticipation of the
respective Permitted Acquisition, (vii) customary provisions restricting the
assignment of licensing agreements, management agreements or franchise
agreements entered into by the Borrower or any of its Subsidiaries in the
ordinary course of business; (viii) restrictions applicable to any Joint Venture
that is a Subsidiary existing at the time of the acquisition thereof as a result
of an Investment pursuant to Section 9.05 or a Permitted Acquisition effected in
accordance with Section 8.14, provided that the restrictions applicable to the
--------
respective such Joint Venture are not made worse, or more burdensome, from the
perspective of the Borrower and its Subsidiaries, than those as in effect
immediately before giving effect to the consummation of the respective
<PAGE>
Investment or Permitted Acquisition, (ix) any restriction or encumbrance with
respect to a Subsidiary imposed pursuant to an agreement which has been entered
into for the sale or disposition of all or substantially all of the capital
stock or assets of such Subsidiary, so long as such sale or disposition of all
or substantially all of the capital stock or assets of such Subsidiary is
permitted under this Agreement, (x) the documentation governing Permitted Debt
(other than Permitted Acquired Debt) and (xi) the Senior Subordinated Note
Documents.
9.15 Limitation on the Creation of Subsidiaries, Joint Ventures and
--------------------------------------------------------------
Unrestricted Subsidiaries. (a) Notwithstanding anything to the contrary
- -------------------------
contained in this Agreement, the Borrower will not, and will not permit any of
its Subsidiaries to, establish, create or acquire after the Initial Borrowing
Date any Subsidiary or Unrestricted Subsidiary (other than Joint Ventures
permitted to be established in accordance with the requirements of Section
9.05(l)); provided that (A) the Borrower, any of its Wholly-Owned Domestic
--------
Subsidiaries and any Unrestricted Subsidiary shall be permitted to establish or
create an Unrestricted Subsidiary, so long as (i) if a Domestic Unrestricted
Subsidiary of the Borrower, all of the capital stock or other equity interests
of such new Domestic Unrestricted Subsidiary owned by the Borrower or any such
Wholly-Owned Domestic Subsidiary shall be pledged pursuant to the Pledge
Agreement and the certificates representing such stock or other equity
interests, together with appropriate powers duly executed in blank, shall be
delivered to the Collateral Agent, (ii) if a Foreign Unrestricted Subsidiary of
the Borrower, all of the capital stock or other equity interests of such new
Foreign Unrestricted Subsidiary owned by the Borrower or any such Wholly-Owned
Domestic Subsidiary (except that not more than 65% of the outstanding voting
stock of any Foreign Unrestricted Subsidiary need be so pledged, except in the
circumstances contemplated by Section 8.12) shall be pledged pursuant to the
Pledge Agreement and the certificates representing such stock or other equity
interests, together with appropriate powers duly executed in blank, shall be
delivered to the Collateral Agent and (iii) all Investments by the Borrower and
its Subsidiaries in any Unrestricted Subsidiary are permitted pursuant to
Section 9.05(l), (B) the Borrower and its Wholly-Owned Subsidiaries shall be
permitted to establish or create Wholly-Owned Subsidiaries so long as, in each
case, (i) at least 10 days' prior written notice thereof is given to the
Administrative Agent (or such shorter period of time as is acceptable to the
Administrative Agent), (ii) the capital stock or other equity interests of such
new Subsidiary are promptly pledged pursuant to, and to the extent required by,
this Agreement and the Pledge Agreement and the certificates, if any,
representing such stock or other equity interests, together with stock or other
appropriate powers duly executed in blank, are delivered to the Collateral
Agent, (iii) in the case of a Domestic Subsidiary, such new Domestic Subsidiary
promptly executes a counterpart of the Subsidiaries Guaranty, the Pledge
Agreement and the relevant Security Documents, (iv) in the case of any Foreign
Subsidiary, such new Foreign Subsidiary promptly executes a counterpart of the
Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement (or
similar document) to the extent required pursuant to Section 8.12, and (v) to
the extent requested by the Administrative Agent or the Required Banks, such new
Subsidiary takes all actions required pursuant to Section 8.11 and (C)
Subsidiaries may be acquired pursuant to Permitted Acquisitions so long as, in
each such case (i) with respect to each Wholly-Owned Subsidiary acquired
pursuant to a Permitted Acquisition, the actions specified in preceding clauses
(B) and (C), as applicable, shall be taken and (ii) with respect to each
Subsidiary which is not a Wholly-Owned Subsidiary and is acquired pursuant to a
Permitted Acquisition, all capital stock or other
<PAGE>
equity interests thereof owned by any Credit Party shall be pledged pursuant to
the Pledge Agreement. In addition, each new Subsidiary that is required to
execute any Credit Document shall execute and deliver, or cause to be executed
and delivered, all other relevant documentation of the type described in Section
5 as such new Subsidiary would have had to deliver if such new Subsidiary were a
Credit Party on the Initial Borrowing Date.
(b) The Borrower will not, nor will the Borrower permit any of its
Subsidiaries to, enter into any Joint Venture, except to the extent permitted by
Section 9.05(l).
SECTION 10. Events of Default. Upon the occurrence of any of the
-----------------
following specified events (each, an "Event of Default"):
10.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of the Loans or (ii) default, and such default shall
continue for three or more Business Days, in the payment when due of any Unpaid
Drawing, any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
10.02 Representations, etc. Any representation, warranty or
---------------------
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
10.03 Covenants. Any Credit Party shall (a) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(f)(i), 8.10, 8.13, 8.14 or 9, or (b) default in the due performance
or observance by it of any term, covenant or agreement (other than those
referred to in Section 10.01, 10.02 or clause (a) of this Section 10.03)
contained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the defaulting party by the
Administrative Agent or the Required Banks; or
10.04 Default Under Other Agreements. (a) The Borrower or any of
------------------------------
its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which Indebtedness was created or
(ii) default in the observance or performance of any agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without regard
to whether any notice is required), any such Indebtedness to become due prior to
its stated maturity; or (b) any Indebtedness (other than the Obligations) of the
Borrower or any of its Subsidiaries shall be declared to be due and payable, or
shall be required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment (unless such required prepayment or
mandatory prepayment results from a default thereunder or an event of the type
that constitutes an Event of Default), prior to the stated maturity thereof;
provided, that it shall not constitute an Event of Default pursuant to clause
- --------
(a) or (b) of this Section 10.04 unless the principal amount of any one issue of
such Indebtedness, or
<PAGE>
the aggregate amount of all such Indebtedness referred to in clauses (a) and (b)
above, exceeds $3,500,000 at any one time; or
10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall
----------------
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the
Borrower or any of its Subsidiaries and the petition is not controverted within
20 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Borrower or any of
its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries; or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
10.06 ERISA. (a) (i) Any Plan or Multiemployer Plan shall fail to
-----
satisfy the minimum funding standard required for any plan year or part thereof
under Section 412 of the Code or Section 302 of ERISA or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code or Section 303 or 304 of ERISA, (ii) a Reportable Event
shall have occurred, (iii) a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to
the advance reporting requirement of PBGC Regulation Section 4043.61 (without
regard to subparagraph (b)(1) thereof) and an event described in subsection .62,
.63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be
reasonably expected to occur within the following 30 days, (iv) any Plan which
is subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, (v) any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be terminated or to be the subject of
termination proceedings under ERISA, (vi) any Plan shall have an Unfunded
Current Liability, (vii) a contribution required to be made by the Borrower or
any Subsidiary of the Borrower with respect to a Plan, a Multiemployer Plan or a
Foreign Pension Plan has not been timely made, (viii) the Borrower or any
Subsidiary of the Borrower has incurred or is likely to incur any liability to
or on account of a Plan or Multiemployer Plan under Section 409, 502(i) or
502(1) of ERISA or Section 4975 of the Code, (ix) the Borrower or any Subsidiary
of any Borrower or any ERISA Affiliate has incurred or is likely to incur any
liability to or on account of a Plan under Section 4062, 4063, 4064, 4069 of
ERISA or Section 401(a)(29) or 4971 of the Code or on account of a group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
under Section 4980B of the Code, (x) the Borrower or any Subsidiary of the
Borrower or any ERISA Affiliate
<PAGE>
has incurred or is likely to incur any liability to or on account of a
Multiemployer Plan under Section 515, 4201, 4204 or 4212 of ERISA; or (ix) the
Borrower or any Subsidiary of the Borrower has incurred or is likely to incur
liabilities pursuant to one or more employee welfare benefit plans (as defined
in Section 3(1) of ERISA) that provide benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or pursuant to
any Plan or Foreign Pension Plan; (b) there shall result from any such event or
events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; and (c) such lien,
security interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Banks, has had, or could reasonably be expected to have,
a Material Adverse Effect; or
10.07 Security Documents. (a) Any Security Document shall cease to
------------------
be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby in favor of
the Collateral Agent, superior to and prior to the rights of all third Persons
(except as permitted by Section 9.03), and subject to no other Liens (except as
permitted by Section 9.03), or (b) any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any such Security Document and such default
shall continue beyond any cure or grace period specifically applicable thereto
pursuant to the terms of any such Security Document; or
10.08 Guaranties. Any Guaranty or any provision thereof shall cease
----------
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under the relevant Guaranty or any Guarantor shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
10.09 Judgments. One or more judgments or decrees shall be entered
---------
against the Borrower or any of its Subsidiaries involving a liability (to the
extent not paid or not fully covered by insurance) in excess of $3,500,000 for
all such judgments and decrees and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof; or
10.10 Ownership. A Change of Control Event shall have occurred;
---------
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of any Agent or
any Bank to enforce its claims against any Guarantor or the Borrower, except as
otherwise specifically provided for in this Agreement (provided, that if an
--------
Event of Default specified in Section 10.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i), (ii) and (iii) below shall
occur automatically without the giving of any such notice): (i) declare the
Total Commitment terminated, whereupon the Commitment of each Bank shall
forthwith terminate immediately and any Commitment Fees shall forthwith become
due and
<PAGE>
payable without any other notice of any kind; (ii) declare the principal of and
any accrued interest in respect of all Loans and all Obligations owing hereunder
(including Unpaid Drawings) to be, whereupon the same shall become, forthwith
due and payable by the Borrower without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii)
enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or
all of the Liens and security interests created pursuant to the Security
Documents; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; (v) direct the Borrower to pay (and the Borrower
hereby agrees upon receipt of such notice, or upon the occurrence of any Event
of Default specified in Section 10.05, to pay) to the Collateral Agent at the
Payment Office such additional amounts of cash, to be held as security for the
Borrower's reimbursement obligations in respect of Letters of Credit then
outstanding, equal to the aggregate Stated Amount of all Letters of Credit then
outstanding; and (vi) apply any cash collateral as provided in Section 4.02.
SECTION 11. Definitions. As used herein, the following terms shall
-----------
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acquired Business" shall mean any Person or business, division or
product line acquired pursuant to a Permitted Acquisition.
"Acquired EBITDA" shall mean, for any Acquired Business for any
period, the Consolidated EBITDA as determined for such Acquired Business on a
basis substantially the same (with necessary reference changes) as provided in
the first sentence of the definition of Consolidated EBITDA contained herein
(without giving effect to the proviso thereto), except that (i) all references
therein and in the component definitions used in determining Consolidated EBITDA
to "the Borrower and its Subsidiaries" shall be deemed to be references to the
respective Acquired Business and (ii) the adjustments contained in clause (ii)
of the definition of Consolidated EBITDA shall not be made. All calculations of
Acquired EBITDA shall be made on a Pro Forma Basis (for such purpose treating
--- -----
(x) each reference to "Consolidated EBITDA" contained in the definition of Pro
Forma Basis as if it were a reference to "Acquired EBITDA", (y) clause (v) of
said definition as if same applied to a determination of Acquired EBITDA for
purposes of Section 9.11, and (z) the text "the two fiscal quarters comprising
the respective Test Period" appearing in clause (v) of said definition as if
same were a reference to "the trailing twelve month period immediately preceding
the respective Permitted Acquisition" and disregarding subclauses (y) and (z) of
clause (v) of said definition).
"Acquired Person" shall have the meaning provided in the definition of
Permitted Acquisition.
"Acquisition Corp." shall mean Coyote Acquisition LLC, a Delaware
limited liability company.
"Acquisition" shall have the meaning provided in Section 5.08(a).
<PAGE>
"Additional Security Documents" shall have the meaning provided in
Section 8.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates", published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Administrative Agent on the basis of quotations
for such certificates received by it from three certificate of deposit dealers
in New York of recognized standing or, if such quotations are unavailable, then
on the basis of other sources reasonably selected by the Administrative Agent,
by (y) a percentage equal to 100% minus the stated maximum rate of all reserve
requirements as specified in Regulation D applicable on such day to a three-
month certificate of deposit of a member bank of the Federal Reserve System in
excess of $100,000 (including, without limitation, any marginal, emergency,
supplemental, special or other reserves), plus (2) the then daily net annual
----
assessment rate as estimated by the Administrative Agent for determining the
current annual assessment payable by BTCo to the Federal Deposit Insurance
Corporation for insuring three month certificates of deposit.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus, without duplication, (i) the sum
of the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense and non-cash interest expense
but excluding any net non-cash charges reflected in Adjusted Consolidated
Working Capital) and net non-cash losses which were included in arriving at
Consolidated Net Income for such period less (ii) all net non-cash gains
(exclusive of items reflected in Adjusted Consolidated Working Capital) included
in arriving at Consolidated Net Income for such period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Adjusted RL Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank, such Bank's RL Percentage and (y) at a time when a Bank
Default exists, (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Loan Commitment at such time by the Adjusted Total
Revolving Loan Commitment at such time, it being understood that all references
herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan
Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total
Revolving Loan Commitment, as the case may be, has been terminated shall be
references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect immediately prior to such termination,
provided that (A) no Bank's Adjusted RL Percentage shall change upon the
- --------
occurrence of a Bank Default from that in effect immediately prior to such Bank
Default if after giving effect to such Bank Default, and any repayment of
<PAGE>
Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(a) or
otherwise, the sum of (i) the aggregate outstanding principal amount of
Revolving Loans of all Non-Defaulting Banks, plus (ii) the aggregate outstanding
principal amount of Swingline Loans, plus (iii) the Letter of Credit
Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted RL Percentage that would have become effective upon the
occurrence of a Bank Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks,
plus (ii) the aggregate outstanding principal amount of Swingline Loans, plus
(iii) the Letter of Credit Outstandings, is equal to or less than the Adjusted
Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted
RL Percentage is changed pursuant to the preceding clause (B) and (ii) any
repayment of such Bank's Revolving Loans or of Unpaid Drawings or of Swingline
Loans that were made during the period commencing after the date of the relevant
Bank Default and ending on the date of such change to its Adjusted RL Percentage
must be returned to the Borrower as a preferential or similar payment in any
bankruptcy or similar proceeding of the Borrower, then the change to such Non-
Defaulting Bank's Adjusted RL Percentage effected pursuant to said clause (B)
shall be reduced to that positive change, if any, as would have been made to its
Adjusted RL Percentage if (x) such repayments had not been made and (y) the
maximum change to its Adjusted RL Percentage would have resulted in the sum of
the outstanding principal of Revolving Loans made by such Bank plus such Bank's
new Adjusted RL Percentage of the outstanding principal amount of Swingline
Loans and of Letter of Credit Outstandings equaling such Bank's Revolving Loan
Commitment at such time.
"Adjusted Senior Leverage Ratio" shall mean the Adjusted Total
Leverage Ratio, except that references to "Consolidated Debt" and "Adjusted
Total Leverage Ratio" therein shall instead be references to "Consolidated
Senior Debt" and "Adjusted Senior Leverage Ratio", respectively.
"Adjusted Total Revolving Loan Commitment" shall mean at any time the
Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of
----
all Defaulting Banks.
"Adjusted Total Leverage Ratio" shall mean, on any date, the ratio of
(i) Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test
Period most recently ended on or prior to such date. All calculations of the
Adjusted Total Leverage Ratio shall be made on a Pro Forma Basis, with
--- -----
determinations of Adjusted Total Leverage Ratio to give effect to all
adjustments (including, without limitation, those specified in clauses (iv) and
(v)) contained in the definition of "Pro Forma Basis" contained herein.
--- -----
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 12.10.
"Affected Loans" shall have the meaning provided in Section 4.02(i).
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person; provided, however, that for purposes of Section 9.07,
-------- -------
an Affiliate of the Borrower shall include any Person that directly or
indirectly owns more than 5% of any class of the capital stock of the Borrower
and any officer or director of the Borrower or any such Person.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"APL" shall mean APL Limited, a Delaware corporation.
"APL Limited Agreements" shall mean and include each of the Non-
Competition Agreement, Administrative Services Agreement, Information Technology
Outsourcing and License Agreement, Stacktrain Services Agreement, TPI Chassis
Sublet Agreement, Equipment Supply Agreement and Primary Obligation and Guaranty
Agreement, in each case referred to in the Offering Memorandum with respect to
the Senior Subordinated Notes, dated as of May 24, 1999, as such agreements may
be amended, modified or supplemented from time to time pursuant to the terms
hereof and thereof.
"Apollo Equity Financing" shall have the meaning provided in Section
5.08(c).
"Apollo Group" shall mean Apollo Advisors, L.P., Apollo Investment
Fund, L.P., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV,
L.P., all Delaware limited partnerships.
"Apollo Management Agreement" shall mean the management agreement,
dated as of May 28, 1999, between Apollo Advisors, L.P. and the Borrower, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof.
"Applicable Excess Cash Flow Percentage" shall mean, with respect to
any Excess Cash Flow Payment Date, 75%; provided that so long as no Default or
--------
Event of Default is then in existence, if on the last day of the relevant Excess
Cash Flow Payment Period, the Adjusted Total Leverage Ratio for the Test Period
then most recently ended (as established pursuant to the officer's certificate
delivered (or required to be delivered) pursuant to Section 8.01(e)) (i) is less
than 3.50:1.00 but greater than or equal to 3.00:1.00, then the Applicable
Excess Cash Flow Percentage shall instead be 50%, (ii) is less than 3.00:1.00
but greater than or equal to 2.5:1.00, then the Applicable Excess Cash Flow
Percentage shall instead be 25% or (iii) is less than 2.50:1.0, then the
Applicable Excess Cash Flow Percentage shall instead be 0%.
"Applicable Margin" initially shall mean a percentage per annum equal
to (i) in the case of Revolving Loans maintained as (x) Base Rate Loans, 1.50%
and (y) Eurodollar Loans, 2.50%, (ii) in the case of Term Loans maintained as
(x) Base Rate Loans, 2.00% and (y)
<PAGE>
Eurodollar Loans, 3.00%, (iii) in the case of Swingline Loans, 1.50% and (iv) in
the case of the Commitment Fee, 0.50%. From and after each day of delivery of
any certificate delivered in accordance with the first sentence of the following
paragraph indicating a different margin than that described in the immediately
preceding sentence (each, a "Start Date") to and including the applicable End
Date described below, the Applicable Margin shall (subject to any adjustment
pursuant to the immediately succeeding paragraph) be that set forth below
opposite the Total Leverage Ratio indicated to have been achieved in any
certificate delivered in accordance with the following sentence:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Revolving Loan Revolving Term Loan Term Loan Applicable
Total Leverage Eurodollar Loan Base Eurodollar Base Rate Commitment
Ratio Margin Rate Margin Margin Margin Fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equal to or greater 2.75% 1.75% 3.00% 2.00% 0.500%
than 5.0:1
- ---------------------------------------------------------------------------------------------------
Equal to or greater 2.50% 1.50% 3.00% 2.00% 0.500%
than 4.0:1 but
less than 5.0:1
- ---------------------------------------------------------------------------------------------------
Equal to or greater 2.25% 1.25% 2.75% 1.75% 0.375%
than 3.50:1 but
less than 4.0:1
- ---------------------------------------------------------------------------------------------------
Less than 3.50:1 2.00% 1.00% 2.50% 1.50% 0.375%
- ---------------------------------------------------------------------------------------------------
</TABLE>
The Total Leverage Ratio shall be determined based on the delivery of
a certificate of the Borrower by an Authorized Officer of the Borrower to the
Administrative Agent (with a copy to be sent by the Administrative Agent to each
Bank), within 45 days of the last day of any fiscal quarter of the Borrower,
which certificate shall set forth the calculation of the Total Leverage Ratio as
at the last day of the Test Period ended immediately prior to the relevant Start
Date (but determined on a Pro Forma Basis to give effect to any Permitted
Acquisition effected on or prior to the date of the delivery of such
certificate) and the Applicable Margins which shall be thereafter applicable
(until same are changed or cease to apply in accordance with the following
sentences); provided that at the time of the consummation of any Permitted
--------
Acquisition or any issuance of Permitted Debt or Disqualified Preferred Stock,
an Authorized Officer of the Borrower shall deliver to the Administrative Agent
a certificate setting forth the calculation of the Total Leverage Ratio on a Pro
---
Forma Basis as of the last day of the last Calculation Period ended prior to the
- -----
date on which such Permitted Acquisition is consummated or such Permitted Debt
or Disqualified Preferred Stock is/are issued for which financial statements
have been made available (or were required to be made available) pursuant to
Section 8.01(b) or (c), as the case may be, and the date of such consummation
shall be deemed to be a Start Date and the Applicable Margins which shall be
thereafter applicable (until same are changed or cease to apply in accordance
with the following sentence) shall be based upon the Total Leverage Ratio as so
calculated. The Applicable Margins so determined shall apply, except as set
forth in the succeeding sentence, from the relevant Start Date to the earliest
of (x) the date on which the next certificate is delivered to the Administrative
Agent, (y) the date on
<PAGE>
which the next Permitted Acquisition is consummated or Permitted Debt or
Disqualified Preferred Stock is/are issued or (z) the date which is 45 days
following the last day of the Test Period in which the previous Start Date
occurred (such earliest date, the "End Date"), at which time, if no certificate
has been delivered to the Administrative Agent indicating an entitlement to new
Applicable Margins (and thus commencing a new Start Date), the Applicable
Margins shall be those set forth in the table above determined as if the Total
Leverage Ratio were greater than 5.0:1.0 (such Applicable Margins as so
determined, the "Highest Applicable Margins"). Notwithstanding anything to the
contrary contained above in this definition, (x) the Applicable Margins shall be
the Highest Applicable Margins at all times during which there shall exist any
Default or Event of Default, (y) prior to the date of delivery of the financial
statements pursuant to Section 8.01(c) for the fiscal year ended December 31,
1999, in no event shall the Applicable Margins be less than those described in
the first sentence of this definition and (z) the Applicable Margin for the
Commitment Fee as otherwise determined above shall be increased by 0.25% for
each day that both (i) the Total Unutilized Revolving Loan Commitment exceeds
75% of the Total Revolving Loan Commitment then in effect and (ii) the Total
Revolving Loan Commitment then in effect exceeds $40,000,000.
"Applicable Prepayment Percentage" shall mean, at any time, (i) for
purposes of Sections 4.02(c) and (d), 100%, provided that if at any time the
--------
Adjusted Total Leverage Ratio is less than 3.50 to 1.00 (as established pursuant
to the officer's certificate last delivered (or required to be delivered)
pursuant to Section 8.01(e)), the Applicable Prepayment Percentage shall instead
be 75% and (ii) for purposes of Section 4.02(e), 50%, provided that if at any
--------
time the Adjusted Total Leverage Ratio is less than 3.50 to 1.00 (as established
pursuant to the officer's certificate last delivered (or required to be
delivered) pursuant to Section 8.01(e)), the Applicable Prepayment Percentage
shall instead be 0%. Notwithstanding anything to the contrary in this
definition, at any time a Default or Event of Default is then in existence, the
Applicable Prepayment Percentage for purposes of (x) Sections 4.02(c) and (d)
shall be 100% and (y) Section 4.02(e) shall be 50%.
"Asset Sale" shall mean any sale, transfer or other disposition by the
Borrower or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of the Borrower or
such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business, (ii) dispositions or
transfers arising out of, or in connection with, the events described in clauses
(i) and (ii) of the definition of Recovery Event, (iii) any sale or other
disposition of Cash Equivalents in the ordinary course of business, (iv) any
merger, consolidation or liquidation permitted by Sections 9.02(f) and (g), (v)
any transfer of assets permitted pursuant to Section 9.02(e), (g) or (k), (vi)
any transaction permitted pursuant to Section 9.02(j) or (n), (vii) the Sale-
Leaseback Transaction to the extent consummated in accordance with the
requirements of Section 5.08 and (viii) any other sales and dispositions that
generate Net Sale Proceeds of less than $750,000 in the aggregate in any fiscal
year of the Borrower.
<PAGE>
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit L (appropriately
completed).
"Authorized Officer" shall mean, with respect to (i) the delivery of
Notices of Borrowing, Notices of Conversion, Letter of Credit Requests and
similar notices, the chief financial officer, the chief operating officer, any
treasurer or other financial officer of the Borrower, (ii) delivery of financial
information and officer's certificates pursuant to this Agreement, the chief
operating officer, any treasurer or other financial officer of the Borrower and
(iii) any other matter in connection with this Agreement or any other Credit
Document, any officer (or a person or persons so designated by any two officers)
of the Borrower, in each case to the extent reasonably acceptable to the
Administrative Agent.
"Available Basket Amount" shall mean, on any date of determination, an
amount equal to the sum of (i) $20,000,000 minus (ii) the aggregate amount of
-----
Investments made (including for such purpose the fair market value of any assets
contributed to any Joint Venture or Unrestricted Subsidiary (as determined in
good faith by senior management of the Borrower), net of Indebtedness and,
without duplication, Capitalized Lease Obligations assigned to, and assumed by,
the respective Joint Venture or Unrestricted Subsidiary in connection therewith)
pursuant to Section 9.05(l) after the Effective Date, minus (iii) the aggregate
-----
amount of Indebtedness or other obligations (whether absolute, accrued,
contingent or otherwise and whether or not due) of any Joint Venture or
Unrestricted Subsidiary for which the Borrower or any of its Subsidiaries (other
than the respective Joint Venture or Unrestricted Subsidiary) is liable, minus
-----
(iv) all payments made by the Borrower or any of its Subsidiaries (other than
the respective Joint Venture or Unrestricted Subsidiary) in respect of
Indebtedness or other obligations of the respective Joint Venture or
Unrestricted Subsidiary (including, without limitation, payments in respect of
obligations described in preceding clause (iii)) after the Effective Date, plus
----
(v) the amount of any increase to the Available Basket Amount made after the
Effective Date in accordance with the provisions of Section 9.05(l). In
connection with the foregoing, it is understood that the acquisition of an
Acquired Person which has ownership interests in one or more Joint Ventures,
pursuant to a Permitted Acquisition effected in accordance with the relevant
requirements of this Agreement shall not be deemed to constitute an Investment
pursuant to Section 9.05(l) and the Available Basket Amount shall not be reduced
as a result of the payment of consideration owing to effect the Permitted
Acquisition (although the Available Basket Amount would be affected to the
extent preceding clauses (iii) or (iv) apply with respect to the Joint Venture
so acquired or to the extent additional Investments are made in the respective
Joint Venture pursuant to Section 9.05(l)).
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including a
Mandatory Borrowing) or to fund its portion of any unreimbursed payment under
Section 2.03 or (ii) a Bank having notified the Administrative Agent and/or the
Borrower that it does not intend to comply with the obligations under Section
1.01(b), 1.01(d) or 2.03, in the case of either clause (i) or (ii) above as a
result of
<PAGE>
the appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" at any time shall mean the highest of (x) the rate which
is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the rate
which is 1/2 of 1% in excess of the Federal Funds Rate and (z) the Prime Lending
Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Common Stock" shall have the meaning provided in Section
7.13.
"Borrower Exchange PIK Preferred Stock" shall mean the Series A
Preferred Nonparticipating Pay-In-Kind Stock, par value $.01 per share, of the
Borrower to be issued, at the option of the Borrower, after the Initial
Borrowing Date pursuant to the Borrower Exchange PIK Preferred Stock Certificate
of Designation in exchange for Pacer Logistics Preferred Stock.
"Borrower Exchange PIK Preferred Stock Certificate of Designation"
shall mean the Certificate of Designation of the Borrower substantially in the
form of Exhibit O, as the same may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Borrower Exchange PIK Preferred Stock Documents" shall mean and
include, on and after the issuance thereof, the Borrower Exchange PIK Preferred
Stock, the Borrower Exchange PIK Preferred Stock Certificate of Designation and
the other documents and instruments entered into in connection with the issuance
of the Borrower Exchange PIK Preferred Stock, as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof.
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans from BTCo on a given date and (ii) the borrowing of one Type of Loan
pursuant to a single Tranche by the Borrower from all of the Banks having
Commitments with respect to such Tranche on a pro rata basis on a given date (or
--- ----
resulting from conversions on a given date), having in the case of Eurodollar
Loans the same Interest Period; provided, that Base Rate Loans incurred pursuant
--------
to Section 1.10(b) shall be considered part of any related Borrowing of
Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall be
in New York City a legal
<PAGE>
holiday or a day on which banking institutions are authorized or required by law
or other government action to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in clause (i) above
and which is also a day for trading by and between banks in U.S. dollar deposits
in the New York or London interbank Eurodollar market.
"Calculation Period" shall have the meaning provided in Section 8.14.
"Capital Expenditures" shall mean, with respect to any Person, for any
period, all expenditures by such Person which should be capitalized in
accordance with GAAP during such period, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with GAAP)
and, without duplication, the amount of all Capitalized Lease Obligations
incurred by such Person during such period.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries, in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States or any agency
or instrumentality thereof (provided that the full faith and credit of the
--------
United States is pledged in support thereof) having maturities of not more than
six months from the date of acquisition, (ii) time deposits, certificates of
deposit and bankers' acceptances of any Bank or any commercial bank having, or
which is the principal banking subsidiary of a bank holding company organized
under the laws of the United States, any State thereof, the District of Columbia
or any foreign jurisdiction having capital, surplus and undivided profits
aggregating in excess of $200,000,000 and having a long-term unsecured debt
rating of at least "A" or the equivalent thereof from S&P or "A2" or the
equivalent thereof from Moody's, with maturities of not more than six months
from the date of acquisition by such Person, (iii) repurchase agreements with a
term of not more than 30 days, involving securities of the types described in
preceding clause (i), and entered into with commercial banks meeting the
requirements of preceding clause (ii), (iv) commercial paper issued by any
Person incorporated in the United States rated at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's and in each
case maturing not more than six months after the date of acquisition by such
Person, (v) investments in money market funds substantially all of whose assets
are comprised of securities of the types described in clauses (i) through (iv)
above and (vi) overnight deposits and demand deposit accounts (in the respective
local currencies) maintained in the ordinary course of business.
"Change of Control Event" shall mean, (I) at any time prior to the
consummation of a Qualified IPO, (a) Apollo Group and its Affiliates shall cease
to own on a fully diluted basis in the aggregate at least 40% of the economic
and voting interest in the Borrower's capital stock
<PAGE>
(for such purpose excluding any Qualified Preferred Stock and any Disqualified
Preferred Stock, in each case to the extent same is not Voting Stock) or (b)
Apollo Group and its Affiliates, together with the Management Participants and
other investors which own shares of Borrower Common Stock on the Initial
Borrowing Date, shall cease to own on a fully diluted basis in the aggregate at
least a majority of the outstanding Voting Stock of the Borrower or (c) any
Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as in effect on the Effective Date), other than
the Permitted Holders, shall (A) have acquired, directly or indirectly,
beneficial ownership on a fully diluted basis of a percentage of the voting
and/or economic interest in the Borrower's capital stock that exceeds the
percentage of the voting and/or economic interest in the Borrower's capital
stock then beneficially owned, directly or indirectly, on a fully diluted basis
by Apollo Group and its Affiliates or (B) obtained the power (whether or not
exercised) to elect a majority of the Borrower's directors or (d) the Board of
Directors of the Borrower shall cease to consist of a majority of Continuing
Directors or (e) a "change of control" or similar event shall occur as provided
in any Senior Subordinated Note Document or any Existing Indebtedness, Permitted
Debt, Pacer Logistics Preferred Stock, Borrower Exchange PIK Preferred Stock
Document, Disqualified Preferred Stock, Qualified Preferred Stock or the
documentation governing the same, to the extent the outstanding principal amount
or liquidation preference, as the case may be, of such Existing Indebtedness,
Permitted Debt, Pacer Logistics Preferred Stock, Borrower Exchange PIK Preferred
Stock Document, Disqualified Preferred Stock or Qualified Preferred Stock
exceeds $5,000,000 or (II) at any time after a Qualified IPO, (a) any Person or
"group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as in effect on the Effective Date), other than the
Permitted Holders, shall have acquired beneficial ownership of 25% or more on a
fully diluted basis of the voting and/or economic interest in the Borrower's
capital stock and Apollo Group and its Affiliates shall own less than such
Person or "group" on a fully diluted basis of the economic and voting interest
in the Borrower's capital stock or (b) the Board of Directors of the Borrower
shall cease to consist of a majority of Continuing Directors or (c) a "change of
control" or similar event shall occur as provided in any Senior Subordinated
Note Document or any Existing Indebtedness, Permitted Debt, Pacer Logistics
Preferred Stock, Borrower Exchange PIK Preferred Stock Document, Disqualified
Preferred Stock, Qualified Preferred Stock or the documentation governing the
same to the extent the outstanding principal amount or liquidation preference,
as the case may be, of such Existing Indebtedness, Permitted Debt, Pacer
Logistics Preferred Stock, Borrower Exchange PIK Preferred Stock Document,
Disqualified Preferred Stock or Qualified Preferred Stock exceeds $5,000,000.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder. Section references to
the Code are to the Code, as in effect at the date of this Agreement and any
subsequent provisions of the Code, amendatory thereof, supplemental thereto or
substituted therefor.
"Collateral" shall mean all property (whether real or personal,
movable or immovable) with respect to which any security interests have been
granted (or purported to be granted) pursuant to any Security Document,
including, without limitation, all Pledge Agreement Collateral, all Security
Agreement Collateral and all cash and Cash Equivalents delivered as collateral
pursuant to any Credit Document.
<PAGE>
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.12.
"Commitment" shall mean any of the commitments of any Bank, i.e.,
whether the Term Loan Commitment or the Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Company" shall mean any corporation, limited liability company,
partnership or other business entity (or the adjectival form thereof, where
appropriate).
"Conex" shall mean Conex Freight Systems, Inc., a California
corporation.
"Consolidated Current Assets" shall mean, at any time, the current
assets of the Borrower and its Subsidiaries at such time determined on a
consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities of the Borrower and its Subsidiaries determined on a
consolidated basis, but excluding the current portion of, and accrued but unpaid
interest on, any Indebtedness under this Agreement and any other long-term
Indebtedness which would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, the sum of (without
duplication) (i) all Indebtedness of the Borrower and its Subsidiaries as would
be required to be reflected on the liability side of a balance sheet of such
Person in accordance with GAAP as determined on a consolidated basis, (ii) all
Indebtedness of the Borrower and its Subsidiaries of the type described in
clause (vii) of the definition of Indebtedness, (iii) unreimbursed drawings on
all letters of credit issued for the account of the Borrower or any of its
Subsidiaries and (iv) all Contingent Obligations of the Borrower and its
Subsidiaries in respect of Indebtedness of other Persons (i.e., Persons other
----
than the Borrower or any of its Subsidiaries) of the type referred to in
preceding clauses (i), (ii) and (iii) of this definition; provided, that for
--------
purposes of this definition, (x) the amount of Indebtedness in respect of
Interest Rate Protection Agreements and Other Hedging Agreements shall be at any
time the aggregate unrealized net loss position, if any, of the Borrower and/or
its Subsidiaries thereunder on a marked-to-market basis determined no more than
one month prior to such time, (y) any Disqualified Preferred Stock of the
Borrower, any Preferred Stock of any of its Subsidiaries (other than the Pacer
Logistics Preferred Stock) and, on and after the Pacer Logistics Preferred Stock
Trigger Date, any Pacer Logistics Preferred Stock shall be treated as
Indebtedness, with an amount equal to the greater of the liquidation preference
or the maximum mandatory fixed repurchase price of any such outstanding
Preferred Stock deemed to be a component of Consolidated Debt and (z) the amount
available to be drawn under letters of credit issued for the account of the
Borrower or any of its Subsidiaries (other than unreimbursed drawings) shall be
excluded in making any determination of "Consolidated Debt".
<PAGE>
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income of the Borrower and its Subsidiaries, determined on a consolidated basis,
before Consolidated Interest Expense (to the extent deducted in arriving at
Consolidated Net Income) and provision for taxes based on income, in each case
that were included in arriving at Consolidated Net Income.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto (in each case to the extent deducted in determining
Consolidated Net Income for such period and not already added back in
determining Consolidated EBIT) the amount of (i) all amortization and
depreciation and other non-cash items and (ii) any management fees and
consulting fees paid pursuant to, and in accordance with the requirements of,
clauses (iii) and (vi) of Section 9.07 during such period, in each case that
were deducted in arriving at Consolidated EBIT for such period; provided that
--------
Consolidated EBITDA for each Test Period ending on or prior to March 31, 2000
shall mean the sum of (x) Consolidated EBITDA for such Test Period as determined
without regard to this proviso plus (y) the amount set forth in Schedule XI
----
hereto as applicable to Consolidated EBITDA for such Test Period.
Notwithstanding anything to the contrary contained above, to the extent
Consolidated EBITDA is to be determined for any Test Period which ends prior to
the first anniversary of the Initial Borrowing Date, Consolidated EBITDA for all
portions of such period occurring prior to the Initial Borrowing Date shall be
calculated in accordance with the definition of Test Period contained herein.
"Consolidated Interest Coverage Ratio" for any period shall mean the
ratio of Consolidated EBITDA to Consolidated Interest Expense for such period.
All calculations of the Consolidated Interest Coverage Ratio shall be made on a
Pro Forma Basis, with determinations of Consolidated Interest Coverage Ratio to
- --- -----
give effect to all adjustments (including, without limitation, those specified
in clauses (iv) and (v)) contained in the definition of "Pro Forma Basis"
--- -----
contained herein.
"Consolidated Interest Expense" shall mean, for any period, the total
consolidated interest expense of the Borrower and its Subsidiaries for such
period (calculated without regard to any limitations on the payment thereof)
plus, without duplication, (i) that portion of Capitalized Lease Obligations of
- ----
the Borrower and its Subsidiaries representing the interest factor for such
period, and capitalized interest expense, plus (ii) the product of (x) the
----
amount of all cash Dividend requirements (whether or not declared or paid) on
Disqualified Preferred Stock of the Borrower and on any Preferred Stock of any
of its Subsidiaries (other than, at any time prior to the Pacer Logistics
Preferred Stock Trigger Date, any Pacer Logistics Preferred Stock) paid, accrued
or scheduled to paid or accrued during such period multiplied by (y) a fraction,
the numerator of which is one and the denominator of which is one minus the then
current effective consolidated Federal, state, local and foreign tax rate
(expressed as a decimal number between one and zero) of the Borrower as
reflected in the audited consolidated financial statements of the Borrower for
its most recently completed fiscal year, which amounts described in preceding
clause (ii) shall be treated as interest expense of the Borrower and its
Subsidiaries for purposes of this definition regardless of the treatment of such
amounts under GAAP, in each case net of the total consolidated cash interest
income of the Borrower and its Subsidiaries for such period, but excluding the
amortization of any deferred financing costs or of any costs in respect of any
<PAGE>
Interest Rate Protection Agreement. Notwithstanding anything to the contrary
contained above, to the extent Consolidated Interest Expense is to be determined
for any Test Period which ends prior to the first anniversary of the Initial
Borrowing Date, Consolidated Interest Expense for all portions of such period
occurring prior to the Initial Borrowing Date shall be calculated in accordance
with the definition of Test Period contained herein.
"Consolidated Net Income" shall mean, for any period, the net after-
tax income of the Borrower and its Subsidiaries determined on a consolidated
basis, without giving effect to any after-tax non-recurring gains or losses or
after-tax items classified as extraordinary gains or losses, any other non-cash
expenses incurred or payments made in connection with the Transaction, and
without giving effect to gains and losses from the sale or disposition of assets
(other than sales or dispositions of inventory, equipment, raw materials and
supplies in the ordinary course of business) by the Borrower and its
Subsidiaries; provided that the following items shall be excluded in computing
--------
Consolidated Net Income (without duplication): (i) the net income or net losses
of any Person in which any other Person or Persons (other than the Borrower and
its Wholly-Owned Domestic Subsidiaries) has an equity interest or interests,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower or such Wholly-Owned Subsidiaries by such Person during
such period, (ii) except for determinations expressly required to be made on a
Pro Forma Basis, the net income (or loss) of any Person accrued prior to the
- --- -----
date it becomes a Subsidiary or all or substantially all of the property or
assets of such Person are acquired by a Subsidiary and (iii) the net income of
any Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary of such net income is not at the time
permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary.
"Consolidated Senior Debt" shall mean, at any time, (x) Consolidated
Debt less (y) the sum of (i) the aggregate outstanding principal amount of the
----
Senior Subordinated Notes at such time, (ii) the aggregate principal amount of
all other subordinated debt incurred pursuant to Sections 9.04 (f), (k) and (l)
and outstanding at such time and otherwise included in Consolidated Debt and
(iii) the aggregate liquidation preference of all Disqualified Preferred Stock
issued pursuant to Section 9.13(c) and otherwise included in Consolidated Debt.
"Container and Chassis Purchases" shall mean purchases of containers
and chassis by the Borrower and its Wholly-Owned Domestic Subsidiaries to be
used in a Permitted Business.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary
<PAGE>
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall
-------- -------
not include endorsements of instruments for deposit or collection or standard
contractual indemnities entered into, in each case in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Continuing Directors" shall mean the directors of the Borrower on the
Effective Date and each other director if such director's nomination for the
election to the Board of Directors of the Borrower is recommended by a majority
of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, each Guaranty
and each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean the Borrower and each Subsidiary Guarantor.
"CSFB" shall mean Credit Suisse First Boston in its individual
capacity and any successor thereto.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Disqualified Preferred Stock" shall mean any Preferred Stock of the
Borrower other than Qualified Preferred Stock.
"Dividend" shall have the meaning provided in Section 9.06.
"Documentation Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Documentation
Agent designated pursuant to Section 12.10.
"Documents" shall mean and include (i) the Credit Documents, (ii) the
Equity Financing Documents, (iii) the Recapitalization Documents, (iv) the
Refinancing Documents, (v) the Senior Subordinated Notes Documents, (vi) the
Pacer Logistics Acquisition Documents, (vii)
<PAGE>
the Sale-Leaseback Transaction Documents, (viii) the APL Limited Documents and
(ix) all other documents, agreements and instruments executed in connection with
the Transaction.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in the United States or any State or territory
thereof.
"Domestic Unrestricted Subsidiary" shall mean any Unrestricted
Subsidiary which is not a Foreign Unrestricted Subsidiary.
"Effective Date" shall have the meaning set forth in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
insurance company, mutual fund, financial institution, a "qualified
institutional buyer" (as defined in Rule 144A of the Securities Act), any fund
that invests in bank loans or any other "accredited investor" (as defined in
Regulation D of the Securities Act) (other than an individual).
"Employee Benefit Plans" shall have the meaning set forth in Section
5.12.
"Employment Agreements" shall have the meaning set forth in Section
5.12.
"End Date" shall have the meaning provided in the definition of
Applicable Margin.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by the Borrower or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued to the Borrower or any of its Subsidiaries under any such law, including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Law" shall mean any federal, state, provincial, foreign
or local policy, statute, law, rule, regulation, ordinance, code or rule of
common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment (for purposes of this
definition (collectively, "Laws")), relating to the environment, or Hazardous
Materials or health and safety to the extent such health and safety issues arise
under the Occupational Safety and Health Act of 1970, as amended, or any such
similar Laws.
"Equity Financing" shall have the meaning provided in Section 5.08(c).
<PAGE>
"Equity Financing Documents" shall mean the documents and agreements
entered into in connection with the Equity Financing.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or a Subsidiary of the Borrower would
be deemed to be a "single employer" within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by BTCo for U.S. dollar deposits of amounts in same day funds comparable
to the outstanding principal amount of the Eurodollar Loan of BTCo for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall have the meaning provided in Section 10.
"Excess Cash Flow" shall mean, for any period, the remainder of (a)
the sum of (i) Adjusted Consolidated Net Income for such period, and (ii) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, minus (b) the sum of (i) the amount of Capital
Expenditures made by the Borrower and its Subsidiaries on a consolidated basis
during such period pursuant to and in accordance with Sections 9.11(a) and (b),
except to the extent financed with the proceeds of Indebtedness (other than the
proceeds of Revolving Loans) or pursuant to Capitalized Lease Obligations, (ii)
the aggregate amount of permanent principal payments of Indebtedness for
borrowed money of the Borrower and its Subsidiaries and the permanent repayment
of the principal component of Capitalized Lease Obligations of the Borrower and
its Subsidiaries (excluding (1) payments with proceeds of asset sales, (2)
payments with the proceeds of Indebtedness or equity and (3) payments of Loans
or other Obligations, provided that repayment of Loans shall be deducted in
determining Excess Cash Flow if such payments were (x) required as a result of a
Scheduled Repayment under Section 4.02(b) or (y) made as a voluntary prepayment
pursuant to Section 4.01 with internally
<PAGE>
generated funds (but in the case of a voluntary prepayment of Revolving Loans,
only to the extent accompanied by a voluntary reduction to the Total Revolving
Loan Commitment)) during such period, (iii) the increase, if any, in Adjusted
Consolidated Working Capital from the first day to the last day of such period
and (iv) without duplication of amounts deducted in the preceding clauses
(b)(i), (ii) and (iii), the amount of cash expended in respect of Permitted
Acquisitions during such period, except to the extent financed with
Indebtedness.
"Excess Cash Flow Payment Date" shall mean the date occurring 90 days
after the last day of a fiscal year of the Borrower.
"Excess Cash Flow Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Flow Payment Date, the immediately
preceding fiscal year of the Borrower.
"Exchange Senior Subordinated Notes" means Senior Subordinated Notes
which are substantially identical securities to the Senior Subordinated Notes
issued on or prior to the Initial Borrowing Date, which Exchange Senior
Subordinated Notes shall be issued pursuant to a registered exchange offer or
private exchange offer for the Senior Subordinated Notes and pursuant to the
Senior Subordinated Notes Indenture. In no event will the issuance of any
Exchange Senior Subordinated Notes increase the aggregate principal amount of
Senior Subordinated Notes then outstanding or otherwise result in an increase in
an interest rate applicable to the Senior Subordinated Notes.
"Existing Indebtedness" shall have the meaning provided in Section
5.09(c).
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.12.
"Existing Letter of Credit" shall have the meaning provided in Section
2.01(e)
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"FNBC" shall mean First National Bank of Chicago in its individual
capacity and any successor thereto.
<PAGE>
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or any of its Subsidiaries residing outside the United States of America, which
plan, fund or other similar program provides, or results in, retirement income,
a deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower other
than a Domestic Subsidiary.
"Foreign Unrestricted Subsidiary" shall mean each Unrestricted
Subsidiary that is incorporated under the laws of any jurisdiction other than
the United States of America, any State thereof, the United States Virgin
Islands or Puerto Rico.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of Section 9,
including defined terms as used therein, are subject (to the extent provided
therein) to Section 13.07(a).
"Gross-Up Amount" shall have the meaning provided in Section 4.04(a).
"Guaranties" shall mean and include the Subsidiaries Guaranty and each
guaranty entered into pursuant to Section 8.12 or 8.14.
"Guarantors" shall mean each Subsidiary Guarantor and any other Person
party to a Guaranty.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic pollutants," "contaminants" or
"pollutants" under any Environmental Law, or words of similar meaning and
regulatory effect.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price
<PAGE>
for goods or services whether or not delivered or accepted, i.e., take-or-pay
----
and similar obligations, (vii) all obligations under Interest Rate Protection
Agreements and Other Hedging Agreements and (viii) all Contingent Obligations of
such Person, provided, that Indebtedness shall not include trade payables and
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accrued expenses, in each case arising in the ordinary course of business.
"Information Systems and Equipment" shall mean all computer hardware,
firmware and software, as well as other information processing systems, or any
equipment containing embedded microchips, whether directly owned, licensed,
leased, operated or otherwise controlled by the Borrower or any of its
Subsidiaries, including through third-party service providers, and which, in
whole or in part, are used, operated, relied upon, or integral to, the
Borrower's or any of its Subsidiaries' conduct of their business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Intercompany Loan" shall have the meaning provided in Section
9.05(f).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit M, evidencing Intercompany Loans.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Investment" shall have the meaning provided in the preamble to
Section 9.05.
"IT Upgrade Expenditures" means expenditures relating to the upgrade
of the Borrower's and its Subsidiaries' information technology systems to the
extent these expenditures would have been capitalized by the Borrower and its
Subsidiaries in accordance with their accounting policies in effect on the
Initial Borrowing Date.
"Joint Venture" shall mean any Person, other than an individual or a
Wholly-Owned Subsidiary of the Borrower, (i) in which the Borrower or a
Subsidiary of the Borrower holds or acquires an ownership interest (whether by
way of capital stock, partnership or limited liability company interest, or
other evidence of ownership) and (ii) which is engaged in a Permitted Business.
<PAGE>
"L/C Supportable Indebtedness" shall mean obligations of the Borrower
or its Wholly-Owned Subsidiaries incurred in the ordinary course of business and
otherwise permitted to exist pursuant to the terms of this Agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fees" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo, FNBC and any other Bank
which, at the request of the Borrower and with the consent of the Administrative
Agent, agrees in such Bank's sole discretion to become a Letter of Credit Issuer
for purposes of issuing Letters of Credit pursuant to Section 2. The sole
Letter of Credit Issuers on the Initial Borrowing Date are BTCo and FNBC.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, hypothec or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any similar recording or notice statute, and any lease having substantially the
same effect as the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan and each
Swingline Loan.
"LTS Equity Rollover" shall have the meaning provided in Section
5.08(a).
"Management Agreements" shall have the meaning provided in Section
5.12.
"Management Participants" shall mean members of senior management of
the Borrower and its Subsidiaries acceptable to the Administrative Agent.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(d).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of (i) the Borrower or the Borrower and its Subsidiaries taken as a
whole and (ii) in the case of any condition or
<PAGE>
representation and warranty to be satisfied or made, as the case may be, on the
Initial Borrowing Date, Pacer Logistics and its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning provided in Section 5.12.
"Maturity Date", with respect to any Tranche of Loans, shall mean the
Term Loan Maturity Date, the Revolving Loan Maturity Date or the Swingline
Expiry Date, as the case may be.
"Maximum Permitted Acquisition Leverage Ratio" shall mean, at any
time, the maximum Adjusted Leverage Ratio which may exist pursuant to Section
9.10 without giving rise to a Default or Event of Default at such time, adjusted
by reducing the ratio appearing in such maximum Adjusted Leverage Ratio by 0.25.
"Maximum Permitted Consideration" shall mean, with respect to any
Permitted Acquisition, the sum (without duplication) of (i) the aggregate
liquidation preference of Preferred Stock issued by the Borrower as
consideration in connection with such Permitted Acquisition, (ii) the aggregate
principal amount of Permitted Acquired Debt acquired or assumed by the Borrower
or any of its Subsidiaries in connection with such Permitted Acquisition, (iii)
the aggregate principal amount of all cash paid (or to be paid) by the Borrower
or any of its Subsidiaries in connection with such Permitted Acquisition
(including payments of fees and costs and expenses in connection therewith),
(iv) the aggregate principal amount of all other Indebtedness assumed, incurred
and/or issued in connection with such Permitted Acquisition to the extent
permitted by Section 9.04 and (v) the fair market value (determined in good
faith by senior management of the Borrower) of all other consideration payable
in connection with such Permitted Acquisition (other than Borrower Common
Stock).
"Maximum Swingline Amount" shall mean $2,500,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans,
$1,000,000, (ii) for Term Loans, $5,000,000 and (iii) for Swingline Loans,
$500,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Morgan" shall mean Morgan Stanley Senior Funding, Inc. in its
individual capacity and any successor thereto.
"Multiemployer Plan" shall mean any multiemployer plan as defined in
Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to
which there is an obligation to contribute of) the Borrower, a Subsidiary of the
Borrower or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Borrower, a Subsidiary of the
Borrower or an ERISA Affiliate maintained, contributed to or had an obligation
to contribute to such plan.
"Net Cash Proceeds" shall mean for any event requiring a reduction of
the Total Revolving Loan Commitment and/or repayment of Term Loans pursuant to
Section 3.03 or 4.02,
<PAGE>
as the case may be, the gross cash proceeds (including any cash received by way
of deferred payment pursuant to a promissory note, receivable or otherwise, but
only as and when received) received from such event, net of reasonable
transaction costs (including, as applicable, any underwriting, brokerage or
other customary commissions and reasonable legal, advisory and other fees and
expenses associated therewith) received from any such event.
"Net Sale Proceeds" shall mean for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of (i) reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith) and payments of
unassumed liabilities relating to the assets sold at the time of, or within 30
days after, the date of such sale, (ii) the amount of such gross cash proceeds
required to be used to repay any Indebtedness (other than Indebtedness of the
Banks pursuant to this Agreement) which is secured by the respective assets
which were sold, and (iii) the estimated marginal increase in income taxes which
will be payable by the Borrower's consolidated group with respect to the fiscal
year in which the sale occurs as a result of such sale; provided, however, that
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such gross proceeds shall not include any portion of such gross cash proceeds
which the Borrower determines in good faith should be reserved for post-closing
adjustments (including indemnification payments) (in the event such amount of
gross cash proceeds so reserved exceeds $50,000, to the extent the Borrower
delivers to the Banks a certificate signed by its chief financial officer or
treasurer, controller or chief accounting officer as to such determination), it
being understood and agreed that on the day that all such post-closing
adjustments have been determined (which shall not be later than six months
following the date of the respective asset sale), the amount (if any) by which
the reserved amount in respect of such sale or disposition exceeds the actual
post-closing adjustments payable by the Borrower or any of its Subsidiaries
shall constitute Net Sale Proceeds on such date received by the Borrower and/or
any of its Subsidiaries from such sale, lease, transfer or other disposition.
The parties hereto acknowledge and agree that Net Sale Proceeds shall not
include any trade-in-credits or purchase price reductions received by the
Borrower or any of its Subsidiaries in connection with an exchange of equipment
for replacement equipment that is the functional equivalent of such exchanged
equipment.
"New Withholding Regulations" shall have the meaning provided in
Section 4.04(b).
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Non-Wholly Owned Entity" shall have the meaning provided in the
definition of Permitted Acquisition.
"Note" shall mean each Term Note, each Revolving Note and/or the
Swingline Note, as the context may require.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
<PAGE>
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at One Bankers Trust Plaza, New York, New York 10006 or such other
office as the Administrative Agent may designate to the Borrower and the Banks
from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Administrative Agent, the Syndication Agent, the Documentation Agent, the
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
"Pacer Logistics" shall mean Pacer International, Inc., a Delaware
corporation, which corporation shall be renamed Pacer Logistics, Inc. on the
Initial Borrowing Date immediately after giving effect to the Transaction.
"Pacer Logistics Acquisition" shall have the meaning provided in
Section 5.08(b).
"Pacer Logistics Acquisition Corp." shall mean Mile High Acquisition
Corp. II, a Delaware corporation and a Wholly-Owned Subsidiary of the Borrower.
"Pacer Logistics Merger Agreement" shall mean the Agreement and Plan
of Merger, dated as of February 22, 1999, among the Borrower, Pacer Logistics
Acquisition Corp. and Pacer Logistics (including the schedules and exhibits
thereto), as the same may be amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof.
"Pacer Logistics Acquisition Documents" shall mean the Pacer Logistics
Merger Agreement and all other agreements, instruments and documents entered
into or delivered in connection with the Pacer Logistics Acquisition.
"Pacer Logistics Equity Rollover" shall have the meaning provided in
Section 5.08(b).
"Pacer Logistics Preferred Stock" shall have the meaning provided in
Section 5.08(b).
"Pacer Logistics Preferred Stock Trigger Date" shall mean May 28,
2001.
"Participant" shall have the meaning provided in Section 2.03(a).
"Payment Office" shall mean the office of the Administrative Agent
located at One Bankers Trust Plaza, New York, New York 10006 or such other
office as the Administrative Agent may designate to the Borrower and the Banks
from time to time.
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquired Debt" shall have the meaning set forth in Section
9.04(d).
"Permitted Acquisition" shall mean the acquisition by the Borrower or
any of its Wholly-Owned Domestic Subsidiaries of assets constituting a business,
division or product line of any Person not already a Subsidiary of the Borrower
or any of its Wholly-Owned Subsidiaries or of 100% of the capital stock or other
equity interests of any such Person, provided that (A) the consideration paid by
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the Borrower or such Wholly-Owned Subsidiary consists solely of cash (including
proceeds of Revolving Loans), the issuance of the Borrower Common Stock, the
issuance of any Qualified Preferred Stock or Disqualified Preferred Stock
otherwise permitted in Section 9.13, the issuance of Indebtedness otherwise
permitted in Section 9.04 (including Permitted Subordinated Indebtedness) and
the assumption/acquisition of any Permitted Acquired Debt (calculated in
accordance with GAAP) relating to such business, division, product line or
Person which is permitted to remain outstanding in accordance with the
requirements of Section 9.04, (B) those acquisitions that are structured as
stock acquisitions shall be effected through a purchase of 100% of the capital
stock or other equity interests of such Person by the Borrower or such Wholly-
Owned Domestic Subsidiary or through a merger between such Person and a Wholly-
Owned Domestic Subsidiary of the Borrower, so that after giving effect to such
merger, 100% of the capital stock or other equity interests of the surviving
corporation of such merger is owned by the Borrower or a Wholly-Owned Domestic
Subsidiary, (C) in the case of the acquisition of 100% of the capital stock or
other equity interests of any Person, such Person (the "Acquired Person") shall
own no capital stock or other equity interests of any other Person unless either
(x) the Acquired Person owns 100% of the capital stock or other equity interests
of such other Person or (y) if the Acquired Person owns capital stock or equity
interests in any other Person which is not a Wholly-Owned Subsidiary of the
Acquired Person (a "Non-Wholly Owned Entity"), both (1) the Acquired Person
shall not have been created or established in contemplation of, or for purposes
of, the respective Permitted Acquisition and (2) any Non-Wholly Owned Entity of
the Acquired Person shall have been non-wholly-owned prior to the date of the
respective Permitted Acquisition and not created or established in contemplation
thereof, (D) substantially all of the business, division or product line
acquired pursuant to the respective Permitted Acquisition, or the business of
the Acquired Person and its Subsidiaries taken as a whole, is in the United
States, (E) the assets acquired, or the business of the Acquired Person and its
Subsidiaries, shall be in a Permitted Business and (F) all applicable
requirements of Sections 8.14 and 9.02 applicable to Permitted Acquisitions are
satisfied. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, an acquisition which does not otherwise meet the
requirements set forth above in the definition of "Permitted Acquisition" shall
constitute a Permitted Acquisition if, and to the extent, the Required Banks
agree in writing that such acquisition shall constitute a Permitted Acquisition
for purposes of this Agreement.
"Permitted Acquisition Additional Cost-Savings" shall mean, in
connection with each Permitted Acquisition, those demonstrable cost-savings and
other adjustments (in each case not included pursuant to clause (iii) or (iv) of
the definition of Pro Forma Basis contained herein)
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<PAGE>
reasonably anticipated by the Borrower to be achieved in connection with such
Permitted Acquisition for the 12 month period following the consummation of such
Permitted Acquisition, which cost-savings and other adjustments shall be
estimated on a good faith basis by the Borrower and, if requested by the
Administrative Agent, be verified by a nationally recognized accounting firm or
as otherwise agreed to by the Administrative Agent.
"Permitted Business" shall mean the freight and transportation-related
services and related businesses and including, without limitation, trucking
(including flatbed and specialized heavy haul trucking), railway shipping,
intermodal and other marketing (rail or over-the-road), transportation equipment
maintenance and inspections, warehousing and freight handling, freight
consolidation and deconsolidation, cross-dock, less-than-truckload common
carrier services, cartage and drayage, general consumer and specialized freight
services, comprehensive transportation management and services, traffic
management, railroad signal project management, rail terminal management and
logistics services to coordinate the foregoing services (including integrated
freight transportation), in each case as such businesses are conducted by the
Borrower and its Subsidiaries on the Effective Date and any other business or
activities as may be substantially similar, incidental or related thereto, and
reasonable extensions of the foregoing.
"Permitted Debt" shall mean and include Permitted Acquired Debt,
Permitted Subordinated Refinancing Indebtedness and Permitted Subordinated
Indebtedness.
"Permitted Encumbrances" shall mean (i) those liens, encumbrances,
hypothecs and other matters affecting title to any Real Property and found
reasonably acceptable by the Administrative Agent, (ii) as to any particular
Real Property at any time, such easements, encroachments, covenants, rights of
way, minor defects, irregularities or encumbrances on title which could not
reasonably be expected to materially impair such Real Property for the purpose
for which it is held by the mortgagor or grantor thereof, or the lien or
hypothec held by the Collateral Agent, (iii) zoning and other municipal
ordinances which are not violated in any material respect by the existing
improvements and the present use made by the mortgagor or grantor thereof of the
premises, (iv) general real estate taxes and assessments not yet delinquent, and
(v) such other similar items as the Administrative Agent may consent to (such
consent not to be unreasonably withheld).
"Permitted Holders" shall mean Apollo Group and its Affiliates and the
Management Participants (to the extent acting as a "group" within the meaning of
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on
the Effective Date).
"Permitted Liens" shall have the meaning provided in Section 9.03.
"Permitted Sale-Leaseback Transaction" shall mean any sale by the
Borrower or any of its Subsidiaries of any asset first acquired by the Borrower
or such Subsidiary after the Effective Date which asset is then leased back to
the Borrower or such Subsidiary, provided that (i) the proceeds of the
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respective sale shall be entirely cash and in an amount at least equal to 85% of
the aggregate amount expended by the Borrower or such Subsidiary in so acquiring
such asset, (ii) such sale and leaseback are effected within 90 days of the
acquisition by the Borrower
<PAGE>
or such Subsidiary of such asset, and (iii) the respective transaction is
otherwise effected in accordance with the applicable requirements of Section
9.02(n).
"Permitted Subordinated Indebtedness" shall mean subordinated
Indebtedness of the Borrower incurred in connection with a Permitted Acquisition
and in accordance with Section 8.14, which Permitted Subordinated Indebtedness
and all terms and conditions thereof (including, without limitation, the
maturity thereof, the interest rate applicable thereto, amortization, defaults,
remedies, voting rights, subordination provisions, etc.), and the documentation
therefor, shall be reasonably satisfactory to the Administrative Agent,
provided, that in any event, unless the Required Banks otherwise expressly
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consent in writing prior to the incurrence thereof, (i) no such Indebtedness
shall be guaranteed by any Subsidiary of the Borrower, (ii) no such Indebtedness
shall be secured by any asset of the Borrower or any of its Subsidiaries and
(iii) such Indebtedness has substantially the same (or, from the perspective of
the Banks, more favorable) subordination provisions as are contained in the
Senior Subordinated Notes Documents. The incurrence of Permitted Subordinated
Indebtedness shall be deemed to be a representation and warranty by the Borrower
that all conditions thereto have been satisfied in all material respects and
that same is permitted in accordance with the terms of this Agreement, which
representation and warranty shall be deemed to be a representation and warranty
for all purposes hereunder, including, without limitation, Sections 6 and 10.
"Permitted Subordinated Refinancing Indebtedness" shall mean
Indebtedness of the Borrower issued or given in exchange for, or all the
proceeds of which are used to refinance, all of the outstanding Senior
Subordinated Notes, so long as (a) such Indebtedness has a weighted average life
to maturity greater than or equal to the weighted average life to maturity of
the Senior Subordinated Notes, (b) such refinancing does not (i) increase the
amount of such Indebtedness outstanding immediately prior to such refinancing or
(ii) add guarantors, obligors or security from that which applied to the Senior
Subordinated Notes, (c) such Indebtedness has substantially the same (or, from
the perspective of the Banks, more favorable) subordination provisions, if any,
as applied to the Senior Subordinated Notes, and (d) all other terms of such
refinancing (including, without limitation, with respect to the amortization
schedules, redemption provisions, maturities, covenants, defaults and remedies),
are not, taken as a whole, materially less favorable to the Borrower than those
previously existing with respect to the Senior Subordinated Notes.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five year period immediately
following the latest date on which the Borrower, or a Subsidiary of the Borrower
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan but excluding all Multiemployer Plans.
<PAGE>
"Pledge Agreement" shall have the meaning provided in Section 5.10(a).
"Pledge Agreement Collateral" shall mean all of the "Collateral" as
defined in the Pledge Agreement.
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"Post-Closing Period" shall have the meaning provided in Section
8.14(a).
"Preferred Stock," as applied to the capital stock of any Person,
means capital stock of such Person (other than common stock of such Person) of
any class or classes (however designed) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of capital
stock of any other class of such Person, and shall include any Qualified
Preferred Stock, Disqualified Preferred Stock, Pacer Logistics Preferred Stock
and, on and after the issuance thereof, Borrower Exchange PIK Preferred Stock.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Pro Forma Balance Sheet" shall have the meaning provided in Section
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5.15.
"Pro Forma Basis" shall mean, in connection with any calculation of
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compliance with any financial covenant or financial term, the calculation
thereof after giving effect on a pro forma basis to (w) if the relevant period
--- -----
to be tested includes any period prior to the Initial Borrowing Date, the
consummation of the Transaction as if the same had occurred on the first day of
such period (for such purpose, without giving pro forma effect to synergies and
--- -----
cost savings which have been, or may be, realized in connection with the
Transaction, such synergies and cost savings having been independently accounted
for in the proviso to the definition of "Consolidated EBITDA"), (x) the
incurrence of any Indebtedness (other than revolving Indebtedness, except to the
extent same is incurred to finance the Transaction, to refinance other
outstanding Indebtedness or to finance Permitted Acquisitions) or Preferred
Stock (other than Qualified Preferred Stock of the Borrower) after the first day
of the relevant Calculation Period as if such Indebtedness or Preferred Stock
had been incurred or issued (and the proceeds thereof applied) on the first day
of the relevant Calculation Period, (y) the permanent repayment of any
Indebtedness (other than revolving Indebtedness except to the extent paid with
Permitted Debt or Disqualified Preferred Stock) or Preferred Stock (other than
Qualified Preferred Stock of the Borrower) after the first day of the relevant
Calculation Period as if such Indebtedness or Preferred Stock had been retired
or redeemed on the first day of the relevant Calculation Period and (z) the
Permitted Acquisition, if any, then being consummated as well as any other
Permitted Acquisition consummated after the first day of the relevant
Calculation Period and on or prior to
<PAGE>
the date of the respective Permitted Acquisition then being effected, with the
following rules to apply in connection therewith:
(i) all Indebtedness and Preferred Stock (other than Qualified
Preferred Stock of the Borrower) (x) (other than revolving Indebtedness,
except to the extent same is incurred to finance the Transaction, to
refinance other outstanding Indebtedness, or to finance Permitted
Acquisitions) incurred or issued after the first day of the relevant
Calculation Period (whether incurred to finance a Permitted Acquisition, to
refinance Indebtedness or otherwise) shall be deemed to have been incurred
or issued (and the proceeds thereof applied) on the first day of the
respective Calculation Period and remain outstanding through the date of
determination (and thereafter in the case of projections pursuant to
Section 8.14(a)(iv)) and (y) (other than revolving Indebtedness except to
the extent paid with Permitted Debt or Disqualified Preferred Stock)
permanently retired or redeemed after the first day of the relevant
Calculation Period shall be deemed to have been retired or redeemed on the
first day of the respective Calculation Period and remain retired through
the date of determination (and thereafter in the case of projections
pursuant to Section 8.14(a)(iv));
(ii) all Indebtedness or Preferred Stock (other than Qualified
Preferred Stock of the Borrower) assumed to be outstanding pursuant to
preceding clause (i) shall be deemed to have borne interest or accrued
dividends, as the case may be, at (x) the rate applicable thereto, in the
case of fixed rate Indebtedness or Preferred Stock or (y) the rates which
would have been applicable thereto during the respective period when same
was deemed outstanding, in the case of floating rate Indebtedness or
Preferred Stock (although interest expense with respect to any Indebtedness
or Preferred Stock for periods while same was actually outstanding during
the respective period shall be calculated using the actual rates applicable
thereto while same was actually outstanding); provided that for purposes of
--------
calculations pursuant to Section 8.14(a)(iv), all Indebtedness or Preferred
Stock (whether actually outstanding or deemed outstanding) bearing interest
at a floating rate of interest shall be tested on the basis of the rates
applicable at the time the determination is made pursuant to said
provisions;
(iii) in making any determination of Consolidated EBITDA, pro forma
--- -----
effect shall be given to any Permitted Acquisition consummated after the
first day of the respective period being tested, taking into account, for
any portion of the relevant period being tested occurring prior to the
consummation of such Permitted Acquisition, demonstrable cost savings
actually achieved simultaneously with, or to be achieved within the one-
year period following, the closing of the respective Permitted Acquisition,
which cost savings would be permitted to be recognized in pro forma
--- -----
statements prepared in accordance with Regulation S-X under the Securities
Act, as if such cost-savings were realized on the first day of the relevant
period;
(iv) without duplication of adjustments provided above, in case of
any Permitted Acquisition consummated after the first day of the relevant
period being tested, pro forma effect shall be given to the termination or
--- -----
replacement of operating leases with
<PAGE>
Capitalized Lease Obligations or other Indebtedness, and to any replacement
of Capitalized Lease Obligations or other Indebtedness with operating
leases, in each case effected at the time of the consummation of such
Permitted Acquisition or thereafter, in each case if effected after the
first day of the period being tested and prior to the date the respective
determination is being made, as if such termination or replacement had
occurred on the first day of the relevant period; and
(v) in making any determination of Consolidated EBITDA for purposes of
any calculation of the Adjusted Total Leverage Ratio, the Adjusted Senior
Leverage Ratio and the Consolidated Interest Coverage Ratio only, (x) for
any Permitted Acquisition which occurred during the last two fiscal
quarters comprising the respective Test Period (and, in the case of Section
8.14, thereafter and on or prior to the relevant date of determination),
there shall be added to Consolidated EBITDA the amount of Permitted
Acquisition Additional Cost Savings, determined in accordance with the
definition thereof contained herein, expected to be realized with respect
to such Permitted Acquisition, (y) for any Permitted Acquisition effected
in the second fiscal quarter of the respective Test Period, the
Consolidated EBITDA shall be increased by 50% of the Permitted Acquisition
Additional Cost Savings estimated to arise in connection with the
respective Permitted Acquisition and (z) for any Permitted Acquisition
effected in the first fiscal quarter of the respective Test Period, the
Consolidated EBITDA shall be increased by 25% of the Permitted Acquisition
Additional Cost Savings estimated to arise in connection with the
respective Permitted Acquisition; provided that the aggregate additions to
--------
Consolidated EBITDA, for any period being tested, pursuant to this clause
(v) shall not exceed 15% of the amount which would have been Consolidated
EBITDA in the absence of the adjustment pursuant to this clause (v).
Notwithstanding anything to the contrary contained above, (x) for purposes of
Sections 9.09 and 9.10 and, for purposes of all determinations of the
Applicable Margins, pro forma effect (as otherwise provided above) shall only be
--- -----
given for events or occurrences which occurred during the respective Test Period
but not thereafter and (y) for purposes of Section 8.14, pro forma effect (as
--- -----
otherwise provided above) shall be given for events or occurrences which
occurred during the respective Test Period and thereafter but on or prior to the
respective date of determination.
"Projections" shall have the meaning provided in Section 5.15(b).
"Qualified IPO" shall mean an underwritten public offering of Borrower
Common Stock which generates cash proceeds to the Borrower of at least
$50,000,000.
"Qualified Preferred Stock" shall mean any Preferred Stock of the
Borrower, the express terms of which shall provide that dividends thereon shall
not be required to be paid at any time (and to the extent) that such payment
would be prohibited by the terms of this Agreement or any other agreement of the
Borrower relating to outstanding indebtedness and which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (including any Change of
Control Event),
<PAGE>
cannot mature and is not mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, and is not redeemable, or required to be repurchased,
at the sole option of the holder thereof (including, without limitation, upon
the occurrence of a Change of Control Event), in whole or in part, on or prior
to the date occurring two years after the Maturity Date.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, immovable property, improvements and
fixtures, including Leaseholds.
"Recap Distribution" shall have the meaning provided in Section
5.08(a).
"Recapitalization" shall mean and include the Acquisition, the LTS
Equity Rollover, the Recap Distribution and such other transactions contemplated
by the Recapitalization Documents.
"Recapitalization Documents" shall mean and include (i) the Stock
Purchase Agreement and (ii) all other agreements and documents governing, or
relating to, the Recapitalization.
"Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any insurance or condemnation proceeds (other than proceeds from
business interruption insurance) payable (i) by reason of theft, physical
destruction or damage or any other similar event with respect to any properties
or assets of the Borrower or any of its Subsidiaries, (whether under any policy
of insurance required to be maintained under Section 8.03 or otherwise) and (ii)
by reason of any condemnation, taking, seizing or similar event with respect to
any properties or assets of the Borrower or any of its Subsidiaries.
"Refinanced Indebtedness" shall have the meaning provided in Section
5.09(a).
"Refinancing" shall mean the refinancing transactions described in
Sections 5.09(a) and (b).
"Refinancing Documents" shall mean each of the agreements, documents
and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 13.17.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from to time in effect and any successor to all or
any portion thereof.
<PAGE>
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27, or .28 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Term Loans and Revolving Loan Commitments (or after the termination
thereof, outstanding Revolving Loans and Adjusted RL Percentage of outstanding
Swingline Loans and Letter of Credit Outstandings) represent an amount greater
than 50% of the sum of all outstanding Term Loans of Non-Defaulting Banks and
the Adjusted Total Revolving Loan Commitment (or after the termination thereof,
the sum of the then total outstanding Revolving Loans of Non-Defaulting Banks
and the aggregate Adjusted RL Percentages of all Non-Defaulting Banks of the
total outstanding Swingline Loans and Letter of Credit Outstandings at such
time).
"Revolving Loan" shall have the meaning provided in Section 1.01(b).
"Revolving Loan Commitment" shall mean, with respect to each RL Bank,
the amount set forth opposite such Bank's name in Schedule I directly below the
column entitled "Revolving Loan Commitment," as the same may be reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or Section 10.
"Revolving Loan Maturity Date" shall mean May 28, 2004.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"RL Bank" shall mean at any time each Bank with a Revolving Loan
Commitment or with outstanding Revolving Loans.
"RL Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Revolving Loan Commitment at such time, provided that if the RL Percentage of
--------
any Bank is to be determined after the Total Revolving
<PAGE>
Loan Commitment has been terminated, then the RL Percentages of the Banks shall
be determined immediately prior (and without giving effect) to such termination.
"Rolling Stock" shall mean railroad cars, locomotives, stacktrain cars
and other rolling stock (including superstructures, racks and accessories
thereto).
"Rollover Amount" shall have the meaning provided in Section 9.11(a).
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"Sale-Leaseback Transaction" shall have the meaning provided in
Section 5.08(c).
"Sale-Leaseback Transaction Documents" shall mean the Purchase, Sale
and Lease Agreement, dated as of May 28, 1999, between the Borrower, as Lessee,
and Transamerica Leasing Inc., as Lessor, and the other agreements and documents
entered into in connection with the Sale-Leaseback Transaction, each as in
effect on the Initial Borrowing Date and as the same may be amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof.
"Scheduled Repayment" shall have the meaning provided in Section
4.02(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Security
Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in Section
5.10(b).
"Security Agreement Collateral" shall mean all of the "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Pledge Agreement, the
Security Agreement and each Additional Security Document, if any.
"Senior Subordinated Notes" shall mean the Borrower's 11-3/4% Senior
Subordinated Notes due 2007, issued pursuant to the Senior Subordinated Note
Indenture, as in effect on the Effective Date and as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof. As used herein, the term "Senior Subordinated Notes" shall include
any Exchange Senior Subordinated Notes issued pursuant to the Senior
Subordinated Notes Indenture in exchange for theretofore outstanding Senior
<PAGE>
Subordinated Notes, as contemplated by the Offering Memorandum, dated as of May
24, 1999, and the definition of Exchange Senior Subordinated Notes.
"Senior Subordinated Notes Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Notes Indenture and all other
documents executed and delivered with respect to the Senior Subordinated Notes
or Senior Subordinated Notes Indenture, as in effect on the Effective Date and
as the same may be amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof.
"Senior Subordinated Notes Indenture" shall mean the Indenture, dated
as of May 28, 1999, among the Borrower, the Subsidiary Guarantors and the Senior
Subordinated Notes Indenture Trustee, as in effect on the Effective Date and as
thereafter amended, modified or supplemented from time to time in accordance
with the requirements hereof and thereof.
"Senior Subordinated Notes Indenture Trustee" shall mean Wilmington
Trust Company or any successor thereto.
"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by the Borrower (and not guaranteed or supported in any
way by the Borrower or any of its Subsidiaries) in the form of Exhibit N.
"Shareholders' Agreements" shall have the meaning provided in Section
5.12.
"Standby Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Start Date" shall have the meaning provided in the definition of
Applicable Margin.
"Stated Amount" of each Letter of Credit shall mean the maximum amount
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated as of March 15, 1999, between Acquisition Corp. and APL, as in effect on
the Effective Date and as the same may be amended, modified or supplemented from
time to time pursuant to the terms hereof and thereof.
"STB" shall mean the Surface Transportation Board or any successor
thereto.
"Subsidiaries Guaranty" shall have the meaning provided in Section
5.11.
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than
<PAGE>
a corporation) in which such Person directly or indirectly through Subsidiaries,
has more than a 50% equity interest at the time. Notwithstanding the foregoing
(and except for purposes of Sections 7.01, 7.04, 7.12, 7.16, 7.17, 7.20,
8.01(h), 8.07, 8.08, 10.05, 10.06 and 10.09, and the definitions of Unrestricted
Subsidiary and Wholly-Owned Unrestricted Subsidiary contained herein), an
Unrestricted Subsidiary shall be deemed not to be a Subsidiary of the Borrower
or any of its other Subsidiaries for purposes of this Agreement.
"Subsidiary Guarantor" shall mean each Wholly-Owned Domestic
Subsidiary (and, to the extent required by Section 8.12, each Wholly-Owned
Foreign Subsidiary) of the Borrower that is or becomes a party to a Guaranty.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(c).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Syndication
Agent designated pursuant to Section 12.10.
"Syndication Date" shall mean that date upon which the Administrative
Agent determines (and notifies the Borrower and the Banks) that the primary
syndication of the Loans and Commitments (and resultant addition of Persons as
Banks pursuant to Section 13.04(b)) has been completed.
"Tax Act" shall have the meaning provided in Section 4.04(f).
"Tax Allocation Agreements" shall have the meaning provided in Section
5.12.
"Tax Benefit" shall have the meaning provided in Section 4.04(c).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(a).
"Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Schedule I directly below the
column entitled "Term Loan Commitment," as the same may be terminated pursuant
to Sections 3.03 and/or 10.
"Term Loan Maturity Date" shall mean May 28, 2006.
"Term Note" shall have the meaning provided in Section 1.05(a).
"Test Period" shall mean each period of four consecutive fiscal
quarters then last ended, in each case taken as one accounting period.
Notwithstanding anything to the contrary
<PAGE>
contained above or in Section 13.07 or otherwise required by GAAP, in the case
of any Test Period ending prior to the first anniversary of the Initial
Borrowing Date, such period shall be a one-year period ending on the last day of
the fiscal quarter last ended, with any calculations of (x) Consolidated
Interest Expense required in determining compliance with Section 9.09 to be made
on a pro forma basis in accordance with, and to the extent provided in, the
--- -----
immediately succeeding sentence and (y) Consolidated EBITDA required in
determining compliance with Sections 9.09 and 9.10 and determining the Adjusted
Total Leverage Ratio, the Total Leverage Ratio and the Adjusted Senior Leverage
Ratio for all purposes of this Agreement to be made on a pro forma basis in
--- -----
accordance with, and to the extent provided in, the second succeeding sentence.
To the extent the respective Test Period (i) includes the fourth fiscal quarter
of the fiscal year ended December 31, 1998, Consolidated Interest Expense for
such fiscal quarter shall be deemed to be $7,000,000, (ii) includes the first
fiscal quarter of the fiscal year ended December 31, 1999, Consolidated Interest
Expense for such fiscal quarter shall be deemed to be $7,000,000 and (iii)
includes the second fiscal quarter for the year ended December 31, 1999,
Consolidated Interest Expense shall be determined by (x) taking actual
Consolidated Interest Expense determined in accordance with the definition
thereof for any period beginning on, and ending after, the Initial Borrowing
Date and (y) for each day of such fiscal quarter occurring prior to the Initial
Borrowing Date, using a per-day Consolidated Interest Expense of $77,777.78;
provided that any additional adjustments required by the definition of Pro Forma
- -------- --- -----
Basis for occurrences after the Initial Borrowing Date shall also be made. To
the extent the respective Test Period (i) includes the fourth fiscal quarter of
the fiscal year ended December 31, 1998, Consolidated EBITDA for such fiscal
quarter shall be deemed to be $23,699,000, (ii) includes the first fiscal
quarter of the fiscal year ended December 31, 1999, Consolidated EBITDA for such
fiscal quarter shall be deemed to be $17,400,000 and (iii) includes the second
fiscal quarter of the fiscal year ended December 31, 1999, Consolidated EBITDA
shall be determined by (x) taking actual Consolidated EBITDA determined in
accordance with the definition thereof for any period beginning on, and ending
after, the Initial Borrowing Date and (y) for each day of such fiscal quarter
occurring prior to the Initial Borrowing Date, using a per-day Consolidated
EBITDA of $200,555; provided that any additional adjustments required by the
--------
definition of Pro Forma Basis for occurrences after the Initial Borrowing Date
--- -----
shall also be made.
"Total Commitment" shall mean, at any time, the sum of the Total Term
Loan Commitment and the Total Revolving Loan Commitment.
"Total Leverage Ratio" shall mean on any date the ratio of (i)
Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test Period
most recently ended on or prior to such date. All calculations of the Total
Leverage Ratio shall be made on a Pro Forma Basis, it being understood and
--- -----
agreed that, as provided in the definition of Pro Forma Basis, the adjustments
--- -----
contained in clause (v) thereof shall not be taken into account in determining
the Total Leverage Ratio.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks.
<PAGE>
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) the sum of (I)
----
the aggregate principal amount of all Revolving Loans and Swingline Loans
outstanding at such time plus (II) the Letter of Credit Outstandings at such
----
time.
"Tractor Trailer" shall mean any truck, tractor, tank trailer or other
trailer and any similar vehicle or trailer used in a Permitted Business.
"Trade Letter of Credit" shall have the meaning set forth in Section
2.01(a).
"Tranche" shall mean the respective facility and commitments utilized
in making Loans hereunder, with there being three separate Tranches, i.e., Term
----
Loans, Revolving Loans and Swingline Loans.
"Transaction" shall mean, collectively, (i) the consummation of the
Recapitalization, (ii) the Equity Financing, (iii) the consummation of the
Refinancing, (iv) the entering into of the Credit Documents and the incurrence
of all Loans hereunder on the Initial Borrowing Date, (v) the consummation of
the Sale-Leaseback Transaction, (vi) the consummation of the Pacer Logistics
Acquisition and (vii) the payment of fees and expenses in connection with the
foregoing.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
----
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial assumptions
at such time consistent with those prescribed by the PBGC for purposes of
Section 4044 of ERISA, exceeds the fair market value of all plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions).
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower
that is acquired or created after the Initial Borrowing Date and designated by
the Borrower as an Unrestricted Subsidiary hereunder by written notice to the
Administrative Agent, provided that the Borrower shall only be permitted to so
--------
designate a new Unrestricted Subsidiary after the Initial Borrowing Date and so
long as (i) no Default or Event of Default exists or would result therefrom,
(ii) in the case of any Unrestricted Subsidiary directly owned by the Borrower
or any of its Wholly-Owned Domestic Subsidiaries, 100% of the capital stock of
such newly-designated
<PAGE>
Unrestricted Subsidiary is owned by the Borrower or such Wholly-Owned Domestic
Subsidiary and (iii) all of the provisions of Section 9.15 shall have been
complied with in respect of such newly-designated Unrestricted Subsidiary and
such Unrestricted Subsidiary shall be capitalized (to the extent capitalized by
the Borrower or any of its Subsidiaries) through Investments as permitted by,
and in compliance with, Section 9.05(l), with any assets owned by such
Unrestricted Subsidiary at the time of the initial designation thereof to be
treated as Investments pursuant to Section 9.05(l), provided that at the time of
--------
the initial Investment by the Borrower or any Wholly-Owned Domestic Subsidiary
in such Subsidiary, the Borrower shall designate such entity as an Unrestricted
Subsidiary in a written notice to the Administrative Agent.
"Unutilized Revolving Loan Commitment" with respect to any RL Bank at
any time shall mean such RL Bank's Revolving Loan Commitment at such time less
----
the sum of (i) the aggregate outstanding principal amount of all Revolving Loans
made by such RL Bank and (ii) such RL Bank's RL Percentage of the total Letter
of Credit Outstandings at such time.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Voting Stock" shall mean, as to any Person, any class or classes of
capital stock of such Person pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the Board of Directors of such Person.
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time; provided that (I) (x) except as provided in the last sentence of the
definition of Subsidiary and (y) other than in the definition of Wholly-Owned
Unrestricted Subsidiary, no Unrestricted Subsidiary shall be considered a
Wholly-Owned Subsidiary and (II) Pacer Logistics shall be deemed to be a Wholly-
Owned Subsidiary of the Borrower for all purposes of this Agreement, so long as
the only capital stock of Pacer Logistics not owned by the Borrower and its
Wholly-Owned Subsidiaries is the Pacer Logistics Preferred Stock issued as
contemplated by clauses (y) and (z) of the parenthetical appearing in Section
9.13(a)(i).
"Wholly-Owned Unrestricted Subsidiary" shall mean any Wholly-Owned
Subsidiary which is an Unrestricted Subsidiary.
<PAGE>
"Written" (whether lower or upper case) or "in writing" shall mean any
form of written communication or a communication by means of telex, facsimile
device, telegraph or cable.
"Year 2000 Compliant" shall mean that all Information Systems and
Equipment accurately process date data (including, but not limited to,
calculating, comparing and sequencing), before, during and after the year 2000,
as well as same and multi-century dates, or between the years 1999 and 2000,
taking into account all leap years, including the fact that the year 2000 is a
leap year, and further, that when used in combination with, or interfacing with,
other Information Systems and Equipment, shall accurately accept, release and
exchange date data, and shall in all material respects continue to function in
the same manner as it performs today and shall not otherwise impair the accuracy
or functionality of Information Systems and Equipment.
SECTION 12. The Agents.
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12.01 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints BTCo as Administrative Agent of such Bank (for purposes of this Section
12, the term "Administrative Agent" shall mean BTCo in its capacity as
Administrative Agent hereunder and Collateral Agent pursuant to the Security
Documents), Morgan as Syndication Agent and CSFB as Documentation Agent to act
as specified herein and in the other Credit Documents, and each such Bank hereby
irrevocably authorizes the Administrative Agent, the Syndication Agent and the
Documentation Agent to take such action on its behalf under the provisions of
this Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent, the
Syndication Agent and the Documentation Agent by the terms of this Agreement and
the other Credit Documents, together with such other powers as are reasonably
incidental thereto. Each of the Administrative Agent, the Syndication Agent and
the Documentation Agent agrees to act as such upon the express conditions
contained in this Section 12. Notwithstanding any provision to the contrary
elsewhere in this Agreement or in any other Credit Document, the Administrative
Agent, the Syndication Agent and the Documentation Agent shall not have any
duties or responsibilities, except those expressly set forth herein or in the
other Credit Documents, or any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Administrative Agent, the Syndication Agent or the Documentation Agent. The
provisions of this Section 12 are solely for the benefit of the Administrative
Agent, the Syndication Agent, the Documentation Agent and the Banks, and neither
the Borrower nor any of its Subsidiaries shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, each of the Administrative Agent, the Syndication
Agent and the Documentation Agent shall act solely as agent of the Banks and
does not assume and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for any Borrower or any of its
Subsidiaries.
12.02 Delegation of Duties. Each of the Administrative Agent, the
--------------------
Syndication Agent and the Documentation Agent may execute any of its duties
under this Agreement or any
<PAGE>
other Credit Document by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
None of the Administrative Agent, the Syndication Agent or the Documentation
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
12.03 Exculpatory Provisions. None of the Administrative Agent, the
----------------------
Syndication Agent, the Documentation Agent or any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such person
in its capacity as Administrative Agent, Syndication Agent or Documentation
Agent, as the case may be, under or in connection with this Agreement or the
other Credit Documents (except for its own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by the Borrower, any of
its Subsidiaries or any of their respective officers contained in this Agreement
or the other Credit Documents, any other Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent, the Syndication Agent or the Documentation Agent under or
in connection with, this Agreement or any other Document or for any failure of
the Borrower or any of its Subsidiaries or any of their respective officers to
perform its obligations hereunder or thereunder. None of the Administrative
Agent, the Syndication Agent or the Documentation Agent shall be under any
obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Documents, or to inspect the properties, books or records
of the Borrower or any of its Subsidiaries. None of the Administrative Agent,
the Syndication Agent or the Documentation Agent shall be responsible to any
Bank for the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any other Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Administrative Agent, the Syndication
Agent or the Documentation Agent, as the case may be, to the Banks or by or on
behalf of the Borrower or any of its Subsidiaries to the Administrative Agent,
the Syndication Agent or the Documentation Agent, as the case may be, or any
Bank or be required to ascertain or inquire as to the performance or observance
of any of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans or of the
existence or possible existence of any Default or Event of Default.
12.04 Reliance by Agents. The Administrative Agent, the Syndication
------------------
Agent and the Documentation Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, facsimile, telex or
teletype message, statement, order or other document or conversation reasonably
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any of their
respective Subsidiaries), independent accountants and other experts selected by
the Administrative Agent, the Syndication Agent or the Documentation Agent, as
the case may be. Each of the Administrative Agent, the Syndication Agent and
the Documentation Agent shall be fully justified in failing or refusing to take
any
<PAGE>
action under this Agreement or any other Credit Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent, the Syndication
Agent and the Documentation Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Credit
Documents in accordance with a request of the Required Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Banks.
12.05 Notice of Default. None of the Administrative Agent, the
-----------------
Syndication Agent or the Documentation Agent shall be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default unless the
Administrative Agent, the Syndication Agent or the Documentation Agent, as the
case may be, has actually received notice from a Bank or a Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Administrative
Agent, the Syndication Agent or the Documentation Agent receives such a notice,
the Administrative Agent, the Syndication Agent or the Documentation Agent, as
the case may be, shall give prompt notice thereof to the Banks. The
Administrative Agent, the Syndication Agent or the Documentation Agent, as the
case may be, shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; provided, that,
--------
unless and until the Administrative Agent, the Syndication Agent or the
Documentation Agent, as the case may be, shall have received such directions,
the Administrative Agent, the Syndication Agent, or the Documentation Agent, as
the case may be, may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.
12.06 Nonreliance on Agents and Other Banks. Each Bank expressly
-------------------------------------
acknowledges that none of the Administrative Agent, the Syndication Agent, the
Documentation Agent or any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by the Administrative Agent, the Syndication
Agent or Documentation Agent hereinafter taken, including any review of the
affairs of the Borrower or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Administrative Agent, the
Syndication Agent or the Documentation Agent to any Bank. Each Bank represents
to the Administrative Agent, the Syndication Agent and the Documentation Agent
that it has, independently and without reliance upon the Administrative Agent,
the Syndication Agent, the Documentation Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Bank also represents that it will, independently
and without reliance upon the Administrative Agent, the Syndication Agent, the
Documentation Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations,
<PAGE>
property, financial and other condition, prospects and creditworthiness of the
Borrower and its Subsidiaries. None of the Administrative Agent, the Syndication
Agent or the Documentation Agent shall have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of any Borrower or any of its Subsidiaries which may come into
the possession of the Administrative Agent, the Syndication Agent, the
Documentation Agent or any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates.
12.07 Indemnification. The Banks agree to indemnify each of the
---------------
Administrative Agent, the Syndication Agent and the Documentation Agent in their
respective capacities as such ratably according to their respective
"percentages" as used in determining the Required Banks at such time or, if the
Commitments have terminated and all Loans have been repaid in full, as
determined immediately prior to such termination and repayment (with such
"percentages" to be determined as if there are no Defaulting Banks), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Administrative Agent, the Syndication Agent or the
Documentation Agent in their respective capacities as such in any way relating
to or arising out of this Agreement or any other Credit Document, or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or any action taken or omitted to be taken by the Administrative Agent,
the Syndication Agent or the Documentation Agent under or in connection with any
of the foregoing, but only to the extent that any of the foregoing is not paid
by the Borrower or any of its Subsidiaries; provided, that no Bank shall be
--------
liable to the Administrative Agent, the Syndication Agent or the Documentation
Agent for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting primarily from the gross negligence or willful misconduct of the
Administrative Agent, the Syndication Agent or the Documentation Agent. If any
indemnity furnished to the Administrative Agent, the Syndication Agent or the
Documentation Agent for any purpose shall, in the opinion of the Administrative
Agent, the Syndication Agent or the Documentation Agent be insufficient or
become impaired, the Administrative Agent, the Syndication Agent or the
Documentation Agent, as the case may be, may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section 12.07 shall survive the
payment of all Obligations.
12.08 Agents in their Individual Capacities. Each of the
-------------------------------------
Administrative Agent, the Syndication Agent and the Documentation Agent and
their respective affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower and its Subsidiaries
as though the Administrative Agent, the Syndication Agent or the Documentation
Agent, as the case may be, were not the Administrative Agent, the Syndication
Agent or the Documentation Agent, as the case may be, hereunder. With respect
to the Loans made by it and all Obligations owing to it, each of the
Administrative Agent, the Syndication Agent and the Documentation Agent shall
have the same rights and powers under this Agreement as any Bank and may
exercise the same as though it were not the Administrative Agent, the
<PAGE>
Syndication Agent or the Documentation Agent, as the case may be, and the terms
"Bank" and "Banks" shall include the Administrative Agent, the Syndication Agent
and the Documentation Agent in their individual capacities.
12.09 Holders. The Administrative Agent may deem and treat the payee
-------
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person or entity who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
12.10 Resignation of the Agents. (a) The Administrative Agent may
-------------------------
resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 30 Business Days' prior
written notice to the Borrower and the Banks. Such resignation shall take
effect upon the appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Administrative Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 30 Business Day period, the Administrative Agent, with the
consent of the Borrower (which consent shall not be unreasonably withheld or
delayed), shall then appoint a successor Administrative Agent who shall serve as
Administrative Agent hereunder or thereunder until such time, if any, as the
Required Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 30th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Required Banks shall thereafter
perform all the duties of the Administrative Agent hereunder and/or under any
other Credit Document until such time, if any, as the Banks appoint a successor
Administrative Agent as provided above.
(e) The Syndication Agent may resign from the performance of all its
functions and duties hereunder and/or under the other Credit Documents at any
time by giving five Business Days' prior written notice to the Banks. Such
resignation shall take effect at the end of such five Business Day period. Upon
the effectiveness of the resignation of the Syndication Agent, the
Administrative Agent shall assume all of the functions and duties of the
Syndication Agent hereunder and/or under the other Credit Documents.
(f) The Documentation Agent may resign from the performance of all
its functions and duties hereunder and/or under the other Credit Documents at
any time by giving five Business Days' prior written notice to the Banks. Such
resignation shall take effect at the
<PAGE>
end of such five Business Day period. Upon the effectiveness of the resignation
of the Documentation Agent, the Administrative Agent shall assume all of the
functions and duties of the Documentation Agent hereunder and/or under the other
Credit Documents.
SECTION 13. Miscellaneous.
-------------
13.01 Payment of Expenses, etc. The Borrower agrees to: (i) pay all
-------------------------
reasonable out-of-pocket costs and expenses of the Agents (including, without
limitation, the reasonable fees and disbursements of White & Case LLP and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and in connection with the
Agents' syndication efforts with respect to this Agreement; (ii) pay all
reasonable out-of-pocket costs and expenses of each Agent, each Letter of Credit
Issuer and each of the Banks in connection with the enforcement of the Credit
Documents and the documents and instruments referred to therein and, after an
Event of Default shall have occurred and be continuing, the protection of the
rights of each Agent, each Letter of Credit Issuer and each of the Banks
thereunder (including, without limitation, the reasonable fees and disbursements
of counsel (including in-house counsel) for each Agent, for each Letter of
Credit Issuer and for each of the Banks); (iii) pay and hold each of the Banks
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Banks harmless
from and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to such Bank) to pay
such taxes; and (iv) indemnify each Agent, the Collateral Agent, each Letter of
Credit Issuer and each Bank, their respective officers, directors, employees,
representatives, trustees and agents from and hold each of them harmless against
any and all losses, liabilities, claims, damages or expenses incurred by any of
them as a result of, or arising out of, or in any way related to, or by reason
of, (a) any investigation, litigation or other proceeding (whether or not any
Agent, the Collateral Agent, any Letter of Credit Issuer or any Bank is a party
thereto and whether or not any such investigation, litigation or other
proceeding is between or among any Agent, the Collateral Agent, any Letter of
Credit Issuer, any Bank, any Credit Party or any third Person or otherwise)
related to the entering into and/or performance of this Agreement or any other
Document or the use of the proceeds of any Loans hereunder or any drawing on any
Letter of Credit or the Transaction or the consummation of any other
transactions contemplated in any Document (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified), or (b)
the actual or alleged presence of Hazardous Materials in the air, surface water
or groundwater or on the surface or subsurface of any Real Property or any
Environmental Claim, in each case, including, without limitation, the reasonable
fees and disbursements of counsel and independent consultants incurred in
connection with any such investigation, litigation or other proceeding. To the
extent that the undertaking to indemnify, pay or hold harmless any Agent or any
Bank set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
<PAGE>
13.02 Right of Setoff. In addition to any rights now or hereafter
---------------
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Agent, each Letter
of Credit Issuer and each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or any of its Subsidiaries or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held or
owing by such Agent, such Letter of Credit Issuer or such Bank (including,
without limitation, by branches and agencies of such Agent, such Letter of
Credit Issuer and such Bank wherever located) to or for the credit or the
account of the Borrower or any of its Subsidiaries against and on account of the
Obligations of the Borrower or any of its Subsidiaries to such Agent, such
Letter of Credit Issuer or such Bank under this Agreement or under any of the
other Credit Documents, including, without limitation, all interests in
Obligations of the Borrower or any of its Subsidiaries purchased by such Bank
pursuant to Section 13.06(b), and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not such Agent, such Letter of Credit Issuer or such
Bank shall have made any demand hereunder and although said Obligations shall be
contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Schedule II; or, at such other address as shall be designated
by any party in a written notice to the other parties hereto. All such notices
and communications shall be mailed, telegraphed, telexed, telecopied or cabled
or sent by overnight courier, and shall be effective when received.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or BTCo (in the case of a Borrowing of Swingline Loans) or
any Letter of Credit Issuer (in the case of the issuance of a Letter of Credit),
as the case may be, may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the
Administrative Agent or BTCo or any Letter of Credit Issuer in good faith to be
from an Authorized Officer of the Borrower. In each such case, the Borrower
hereby waives the right to dispute the Administrative Agent's, BTCo's or such
Letter of Credit Issuer's record of the terms of such telephonic notice.
13.04 Benefit of Agreement. (a) This Agreement shall be binding
--------------------
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, the Borrower may not
-------- -------
assign or transfer any of its rights, obligations or interest hereunder or under
any other Credit Document without the prior written consent of each of the Banks
and, provided further, that, although any Bank may grant participations in its
----------------
rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder
(and may not transfer or assign all or any portion of its Commitments or Loans
hereunder except as provided in
<PAGE>
Section 13.04(b)) and the participant shall not constitute a "Bank" hereunder
and, provided further, that no Bank shall transfer or grant any participation
----------------
under which the participant shall have rights to approve any amendment to or
waiver of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of any Loan,
Note or Letter of Credit (unless such Letter of Credit is not extended beyond
the Revolving Loan Maturity Date) in which such participant is participating, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the amount of the participant's participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or
of a mandatory reduction in the Total Commitment or of a mandatory repayment of
Loans shall not constitute a change in the terms of such participation, that an
increase in any Commitment or Loan shall be permitted without the consent of any
participant if the participant's participation is not increased as a result
thereof and that any amendment or modification to the financial definitions in
this Agreement shall not constitute a reduction in any rate of interest or fees
for purposes of this clause (i)), (ii) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement or (iii)
release all or substantially all of the Collateral under all of the Security
Documents (except as expressly provided in the Security Documents) supporting
the Loans hereunder in which such participant is participating. In the case of
any such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together with
one or more other Banks) may (x) assign all or a portion of its Revolving Loan
Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to (i) its parent company and/or any affiliate of such
Bank which is at least 50% owned by such Bank or its parent company or to one or
more Banks or (ii) in the case of any Bank that is a fund that invests in bank
loans or that manages (directly or through an Affiliate) any fund that invests
in bank loans, any fund that invests in bank loans and is managed by the same
investment advisor as such Bank, by an Affiliate of such investment advisor or
by such Bank, as the case may be, or (y) assign all, or if less than all, a
portion equal to at least $5,000,000 in the aggregate for the assigning Bank or
assigning Banks, of such Revolving Loan Commitments (and related outstanding
Obligations hereunder) and outstanding principal amount of Term Loans to one or
more Eligible Transferees (treating (x) any fund that invests in bank loans and
(y) any other fund that invests in bank loans and is managed by the same
investment advisor as such fund or by an Affiliate of such investment advisor,
as a single Eligible Transferee), each of which assignees shall become a party
to this Agreement as a Bank by execution of an Assignment and Assumption
Agreement, provided that, (i) at such time Schedule I shall be deemed modified
--------
to reflect the Revolving Loan Commitments and/or outstanding Term Loans, as the
case may be, of such new Bank and of the existing Banks, (ii) upon surrender of
the old Notes (or the furnishing of a standard indemnity letter from the
respective assigning Bank in respect of any lost Notes reasonably acceptable to
the Borrower), new Notes will be issued, at the Borrower's expense, to
<PAGE>
such new Bank and to the assigning Bank, such new Notes to be in conformity with
the requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Revolving Loan Commitments and/or outstanding Term
Loans, as the case may be, (iii) the consent of the Administrative Agent and, so
long as no Default or Event of Default is then in existence, the Borrower shall
be required in connection with any assignment to an Eligible Transferee pursuant
to clause (y) of this Section 13.04(b) (which consent, in each case, shall not
be unreasonably withheld or delayed), (iv) the consent of each Letter of Credit
Issuer shall be required in connection with any assignment of Revolving Loan
Commitments pursuant to clause (y) of this Section 13.04(b) (which consent shall
not be unreasonably withheld or delayed) and (v) the Administrative Agent shall
receive at the time of each assignment, from the assigning or assignee Bank, the
payment of a non-refundable assignment fee of $5,000 and, provided further, that
----------------
such transfer or assignment will not be effective until recorded by the
Administrative Agent on the Register pursuant to Section 13.17. To the extent
of any assignment pursuant to this Section 13.04(b), the assigning Bank shall be
relieved of its obligations hereunder with respect to its assigned Revolving
Loan Commitments and/or outstanding Term Loans. At the time of each assignment
pursuant to this Section 13.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes, the
respective assignee Bank shall provide to the Borrower and the Administrative
Agent the appropriate Internal Revenue Service Forms (and, if applicable a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Bank's Revolving Loan Commitment
and outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b)
would, due to circumstances existing at the time of such assignment, result in
increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged
by the respective assigning Bank prior to such assignment, then the Borrower
shall not be obligated to pay such increased costs (although the Borrower shall
be obligated to pay any other increased costs of the type described above
resulting from changes after the date of the respective assignment).
Notwithstanding anything to the contrary contained above, at any time after the
termination of the Total Revolving Loan Commitment, if any Revolving Loans or
Letters of Credit remain outstanding, assignments may be made as provided above,
except that the respective assignment shall be of a portion of the outstanding
Revolving Loans of the respective RL Bank and its participation in Letters of
Credit and its obligation to make Mandatory Borrowings, although any such
assignment effected after the termination of the Total Revolving Loan Commitment
shall not release the assigning RL Bank from its obligations as a Participant
with respect to outstanding Letters of Credit or to fund its share of any
Mandatory Borrowing (although the respective assignee may agree, as between
itself and the respective assigning RL Bank, that it shall be responsible for
such amounts).
(c) Nothing in this Agreement shall prevent or prohibit any Bank or
BTCo from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and, with
the consent of the Administrative Agent, any Bank which is a fund may pledge all
or any portion of its Notes or Loans to its trustee in support of its
obligations to its trustee. No pledge pursuant to this clause (c) shall release
the transferor Bank from any of its obligations hereunder.
<PAGE>
13.05 No Waiver; Remedies Cumulative. No failure or delay on the
------------------------------
part of any Agent, the Collateral Agent or any Bank in exercising any right,
power or privilege hereunder or under any other Credit Document and no course of
dealing between any Credit Party and any Agent, the Collateral Agent or any Bank
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which any Agent, the Collateral Agent or any Bank would otherwise have.
No notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Agents, the Collateral Agent or the
Banks to any other or further action in any circumstances without notice or
demand.
13.06 Payments Pro Rata. (a) The Administrative Agent agrees that
-----------------
promptly after its receipt of each payment from or on behalf of any Credit Party
in respect of any Obligations of such Credit Party, it shall, except as
otherwise provided in this Agreement, distribute such payment to the Banks
(other than any Bank that has consented in writing to waive its pro rata share
--- ----
of such payment) pro rata based upon their respective shares, if any, of the
--- ----
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; provided, that if
--------
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
13.07 Calculations; Computations. (a) The financial statements to
--------------------------
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks); provided, that except as otherwise specifically
--------
provided herein, all computations determining the Adjusted Total Leverage Ratio,
the Total Leverage Ratio and the Adjusted Senior Leverage Ratio and compliance
with Sections 4.02, 8.14 and 9, including definitions used therein shall, in
each case, utilize accounting principles and policies in effect at the time of
the preparation of, and in conformity with those used to prepare, the December
31, 1998 financial statements of the Borrower delivered to the Banks pursuant to
Section 7.10(b); provided further, that (i) to the extent expressly required
----------------
pursuant to the provisions of this Agreement, certain calculations shall be made
on a Pro Forma
--- -----
<PAGE>
Basis, (ii) to the extent compliance with any of Section 9.09 or 9.10 or the
determination of any of the Adjusted Total Leverage Ratio, the Total Leverage
Ratio and the Adjusted Senior Leverage Ratio would include periods occurring
prior to the Initial Borrowing Date, such calculation shall be adjusted on a Pro
---
Forma Basis to give effect to the Transaction as if same had occurred on the
- -----
first day of the respective period, (iii) in the case of any determinations of
Consolidated Interest Expense or Consolidated EBITDA for any portion of any Test
Period which ends prior to the Initial Borrowing Date, all computations
determining compliance with Sections 9.09 or 9.10 and all determinations of the
Adjusted Total Leverage Ratio, the Adjusted Senior Leverage Ratio and the Total
Leverage Ratio (including as used in the definition of Applicable Margin) shall
be calculated in accordance with the definition of Test Period contained herein
and (iv) for purposes of calculating the Applicable Margins, financial ratios,
financial terms, all covenants and related definitions, all such calculations
based on the operations of the Borrower and its Subsidiaries on a consolidated
basis shall be made without giving effect to the operations of any Unrestricted
Subsidiaries.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
13.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
------------------------------------------------
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Borrower hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. The
Borrower hereby irrevocably designates, appoints and empowers CT Corporation
System, with offices on the date hereof at 1633 Broadway, New York, NY 10019 as
its designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of the property of the Borrower and its Subsidiaries,
service of any and all legal process, summons, notices and documents which may
be served in any such action or proceeding. If for any reason such designee,
appointee and agent shall cease to be available to act as such, the Borrower
agrees to designate a new designee, appointee and agent in New York City on the
terms and for the purposes of this provision satisfactory to the Administrative
Agent under this Agreement. The Borrower hereby further irrevocably waives any
claim that any such courts lack jurisdiction over the Borrower, and agrees not
to plead or claim, in any legal action or proceeding with respect to this
Agreement or any other Credit Document brought in any of the aforesaid courts,
that any such court lacks jurisdiction over the Borrower. The Borrower further
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Borrower, at its address for notices pursuant to Section 13.03,
such service to become effective 30 days after such mailing. The Borrower
hereby irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other Credit Document that service of process
was in any way invalid or ineffective. Nothing
<PAGE>
herein shall affect the right of any Agent, the Collateral Agent, any Bank or
the holder of any Note to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against any Credit Party in
any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
13.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
13.10 Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which the Borrower, the Administrative Agent, the
Syndication Agent and the Documentation Agent and each Bank shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered the same (including by way of facsimile transmission) to the
Administrative Agent at the Notice Office or at the office of Agents' counsel.
The Administrative Agent will give the Borrower and each Bank prompt written
notice of the occurrence of the Effective Date.
13.11 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
-------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
--------
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected thereby in the case of the following clause
(i)), (i) extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof (it being understood that any amendment or
modification to the financial definitions in this Agreement shall not constitute
a reduction in any rate of interest or fees for purposes of this clause (i)),
(ii) release all or substantially all of the Collateral (except as expressly
provided in the Security Documents) under all the Security Documents, (iii)
amend, modify or waive any provision of this Section 13.12, (iv) reduce the
percentage specified in the definition of Required Banks (it being understood
that, with the consent of the Required Banks, additional extensions of credit
pursuant to this Agreement may be included in the determination of the Required
Banks on
<PAGE>
substantially the same basis as the extensions of Term Loans and Revolving Loan
Commitments are included on the Effective Date) or (v) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement or any other Credit Document; provided further, that no such change,
----------------
waiver, discharge or termination shall (v) increase the Commitments of any Bank
over the amount thereof then in effect without the consent of such Bank (it
being understood that waivers or modifications of conditions precedent,
covenants, Defaults or Events of Default or of a mandatory reduction in the
Total Commitment shall not constitute an increase of the Commitment of any Bank,
and that an increase in the available portion of any Commitment of any Bank
shall not constitute an increase in the Commitment of such Bank), (w) without
the consent of each Letter of Credit Issuer, amend, modify or waive any
provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit, (x) without the consent of BTCo, alter its rights or
obligations with respect to Swingline Loans, (y) without the consent of the
Agents, amend, modify or waive any provision of Section 12 as same applies to
the Agents or any other provision as same relates to the rights or obligations
of the Agents and (z) without the consent of the Collateral Agent, amend, modify
or waive any provision relating to the rights or obligations of the Collateral
Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination of or to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such non-consenting Bank or Banks (or, at the option
of the Borrower if the respective Bank's consent is required with respect to
less than all Tranches of Loans (or related Commitments), to replace only the
Revolving Loan Commitments and/or Loans of the respective non-consenting Bank
which gave rise to the need to obtain such Bank's individual consent) with one
or more Replacement Banks pursuant to Section 1.13 so long as at the time of
such replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Bank's
Revolving Loan Commitment (if such Bank's consent is required as a result of its
Revolving Loan Commitment) and/or repay each Tranche of outstanding Loans of
such Bank which gave rise to the need to obtain such Bank's consent and/or cash
collateralize its applicable Adjusted RL Percentage of the Letter of Credit of
Outstandings, in accordance with Sections 3.02(b) and/or 4.01(b), provided that,
--------
unless the Commitments which are terminated and Loans which are repaid pursuant
to preceding clause (B) are immediately replaced in full at such time through
the addition of new Banks or the increase of the Commitments and/or outstanding
Loans of existing Banks (who in each case must specifically consent thereto),
then in the case of any action pursuant to preceding clause (B), the Required
Banks (determined after giving effect to the proposed action) shall specifically
consent thereto, provided further, that the Borrower shall not have the right to
----------------
replace a Bank, terminate its Commitment or repay its Loans solely as a result
of the exercise of such Bank's rights (and the withholding of any required
consent by such Bank) pursuant to the second proviso to Section 13.12(a).
<PAGE>
13.13 Survival. All indemnities set forth herein including, without
--------
limitation, in Sections 1.10, 1.11, 2.05, 4.04, 12.07 and 13.01, shall, subject
to the provisions of Section 13.18 (to the extent applicable), survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
13.14 Domicile of Loans and Commitments. Each Bank may transfer and
---------------------------------
carry its Loans and/or Commitments at, to or for the account of any branch
office, subsidiary or affiliate of such Bank; provided, that the Borrower shall
--------
not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04
resulting from any such transfer (other than a transfer pursuant to Section
1.12) to the extent such costs would not otherwise be applicable to such Bank in
the absence of such transfer.
13.15 Confidentiality. (a) Each of the Banks agrees that it will
---------------
use its reasonable efforts not to disclose without the prior consent of the
Borrower (other than to its directors, trustees, employees, officers, auditors,
counsel or other professional advisors, to affiliates or to another Bank if the
Bank or such Bank's holding or parent company in its sole discretion determines
that any such party should have access to such information, provided that such
--------
persons shall be subject to the provisions of this Section 13.15 to the same
extent as such Bank) any information with respect to the Borrower or any of its
Subsidiaries which is furnished by the Borrower or any of its Subsidiaries
pursuant to this Agreement; provided, that any Bank may disclose any such
--------
information (a) which is publicly known at the time of the disclosure or which
has become generally available to the public, (b) as may be required or
appropriate (x) in any report, statement or testimony submitted to any
municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Bank or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors or (y) in connection with any request
or requirement of any such regulatory body (including any securities exchange or
self-regulatory organization), (c) as may be required or appropriate in response
to any summons or subpoena or in connection with any litigation or other legal
process, (d) to comply with any law, order, regulation or ruling applicable to
such Bank, and (e) to any prospective transferee in connection with any
contemplated transfer of any of the Notes or any interest therein by such Bank;
provided, that such prospective transferee agrees to be bound by this Section
- --------
13.15 to the same extent as such Bank.
(b) The Borrower hereby acknowledges and agrees that each Bank may
share with any of its affiliates any information related to the Borrower or any
of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its
Subsidiaries), provided that such Persons shall be subject to the provisions of
--------
this Section 13.15 to the same extent as such Bank.
13.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
<PAGE>
13.17 Register. The Borrower hereby designates the Administrative
--------
Agent to serve as the Borrower's agent, solely for purposes of this Section
13.17, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Banks, the Loans made by each of
the Banks and each repayment in respect of the principal amount of the Loans of
each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of any Commitment of such Bank
and the rights to the principal of, and interest on, any Loan shall not be
effective until such transfer is recorded on the Register maintained by the
Administrative Agent with respect to ownership of such Commitment and Loans and
prior to such recordation all amounts owing to the transferor with respect to
such Commitment and Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Commitment and
Loans shall be recorded by the Administrative Agent on the Register only upon
the acceptance by the Administrative Agent of a properly executed and delivered
Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident
with the delivery of such an Assignment and Assumption Agreement to the
Administrative Agent for acceptance and registration of assignment or transfer
of all or part of a Commitment and/or Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Note
evidencing such Commitment and/or Loan, and thereupon one or more new Notes in
the same aggregate principal amount shall be issued to the assigning or
transferor Bank and/or the new Bank. The Borrower agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this Section
13.17.
13.18 Limitation on Additional Amounts, etc. Notwithstanding
--------------------------------------
anything to the contrary contained in Section 1.10, 1.11, 2.05 or 4.04 of this
Agreement, unless a Bank gives notice to the Borrower that it is obligated to
pay an amount under such Section within six months after the later of (x) the
date the Bank incurs the respective increased costs, Taxes, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on
capital or (y) the date such Bank has actual knowledge of its incurrence of the
respective increased costs, Taxes, loss, expense or liability, reductions in
amounts received or receivable or reduction in return on capital, then such Bank
shall only be entitled to be compensated for such amount by the Borrower
pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be, to the
extent of the costs, Taxes, loss, expense or liability, reduction in amounts
received or receivable or reduction in return on capital that are incurred or
suffered on or after the date which occurs six months prior to such Bank giving
notice to the Borrower that it is obligated to pay the respective amounts
pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This
Section 13.18 shall have no applicability to any Section of this Agreement other
than said Sections 1.10, 1.11, 2.05 and 4.04.
13.19 Post-Closing Actions. Notwithstanding anything to the contrary
--------------------
contained in this Agreement or the other Credit Documents, the parties hereto
acknowledge and agree that:
(a) Security Document Filings. Form UCC-1 and PPSA Form 1-C financing
-------------------------
statements (or other appropriate local equivalent) delivered by the
Borrower to the
<PAGE>
Collateral Agent on the Initial Borrowing Date shall be filed in the
appropriate governmental office within 5 days following the Initial
Borrowing Date.
(b) UCC-3 Termination Statements. Within 15 days following the
----------------------------
Initial Borrowing Date (or such later date as shall have been determined by
the Administrative Agent in its sole discretion), the Administrative Agent
shall have received Form UCC-3 termination statements in respect of the
Liens listed on Part B of Schedule IX hereto and same shall be filed in the
appropriate governmental office within 15 days following the Initial
Borrowing Date (or such later date as shall have been determined by the
Administrative Agent in its sole discretion).
(c) Opinions of Local Counsel. Within 60 days following the Initial
-------------------------
Borrowing Date, the Collateral Agent shall have received additional
opinions, addressed to each Agent, the Collateral Agent and each of the
Banks from local counsel to Credit Parties and/or the Agents reasonably
satisfactory to the Collateral Agent (including an opinion from special STB
counsel), which opinions (x) shall cover the perfection and enforceability
as against third parties of the security interests granted pursuant to the
Security Documents and such other matters relating to the transactions
contemplated herein as the Collateral Agent may reasonably request and (y)
shall be in form and substance reasonably satisfactory to the Collateral
Agent.
(d) STB Filing, etc. (i) Within 30 days following the Initial
----------------
Borrowing Date, the Borrower shall have caused to be delivered and filed
with the STB transmittal letters in the form required by 49 C.F.R. 1177
(appropriately completed) from each Credit Party which owns Rolling Stock
on the Initial Borrowing Date, together with executed copies of the
Security Agreement, in respect of all of the Rolling Stock owned by such
Credit Party on the Initial Borrowing Date.
(ii) Within 45 days following the Initial Borrowing Date, the Borrower
shall have caused to be delivered and filed with the Office of the
Registrar General of Canada fully executed copies of the Security Agreement
in accordance with the requirements of the Canada Transportation Act and,
promptly after such filing, published notice thereof in the Canada Gazette.
(e) Certificates of Title. Certificates of title in respect of all
----------------------
Tractor Trailers owned by the Borrower and its Subsidiaries on the Initial
Borrowing Date (other than Tractor Trailers securing Existing Indebtedness
not refinanced on the Initial Borrowing Date) noting the Collateral Agent's
security interest in the respective Tractor Trailer covered thereby shall
be registered in the appropriate state or provincial governmental office
within 90 days following the Initial Borrowing Date.
All provisions of this Credit Agreement and the other Credit Documents
(including, without limitation, all conditions precedent, representations,
warranties, covenants, events of default and other agreements herein and
therein) shall be deemed modified to the extent necessary to effect the
foregoing (and to permit the taking of the actions described above within the
time periods, required above, rather than as otherwise provided in the Credit
Documents);
<PAGE>
provided, that (x) to the extent any representation and warranty would not be
- --------
true because the foregoing actions were not taken on the Initial Borrowing Date,
the respective representation and warranty shall be required to be true and
correct in all material respects at the time the respective action is taken (or
was required to be taken) in accordance with the foregoing provisions of this
Section 13.19 and (y) all representations and warranties relating to the
Collateral Documents shall be required to be true immediately after the actions
required to be taken by Section 13.19 have been taken (or were required to be
taken). The acceptance of the benefits of the Loans shall constitute a
representation, warranty and covenant by the Borrower to each of the Banks that
the actions required pursuant to this Section 13.19 will be, or have been, taken
within the relevant time periods referred to in this Section 13.19 and that, at
such time, all representations and warranties contained in this Credit Agreement
and the other Credit Documents shall then be true and correct without any
modification pursuant to this Section 13.19. The parties hereto acknowledge and
agree that the failure to take any of the actions required above, within the
relevant time periods required above, shall give rise to an immediate Event of
Default pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
PACER INTERNATIONAL, INC. (f/k/a Land Transport
Services, Inc.)
By /s/ Lawrence C. Yarberry
--------------------------
Title: Executive Vice President & Chief
Financial Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By: /s/ Anthony LoGrippo
---------------------
Title: Principal
MORGAN STANLEY SENIOR FUNDING, INC.,
Individually and as Syndication Agent
By: /s/ Henry F. D'Alessandro
--------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON
Individually and as Documentation Agent
By: /s/ Karl M. Studer
-------------------
Title: Director
By: /s/ Robert Hetu
-----------------
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Carol Lovell
-----------------
Title: Managing Director
BANK UNITED
By: /s/ Phil Green
---------------
Title: Director Commercial Syndications
ABN AMRO BANK N.V.
By: /s/ David J. Thomas
---------------------
Title: Group Vice President
By: /s/ Gerald F. Mackin
----------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kenneth J. Kramer
-----------------------
Title: Vice President
CREDIT LYONNAIS AMERICAS NEW YORK BRANCH
By: /s/ Attila Koc
---------------
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ Roy O. Young
------------------
Title: Vice President
HELLER FINANCIAL
By: /s/ Robert M. Reeg
--------------------
Title: Assistant Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Takuya Honjo
------------------
Title: Senior Vice President
THE MITSUBISHI TRUST AND BANKING CORPORATION
By: /s/ Toshihiro Hayashi
-----------------------
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ B. Ross Smead
-------------------
Title: Vice President
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Perry Vavoules
--------------------
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison A. Mason
---------------------
Title: Vice President
<PAGE>
SCHEDULE I
----------
LIST OF BANKS AND COMMITMENTS
-----------------------------
<TABLE>
<CAPTION>
Term Loan Revolving Loan
Bank Commitment Commitment
- ---- ---------- --------------
<S> <C> <C>
Bankers Trust Company 9,765,957.45 $ 7,234,042.55
Morgan Stanley Senior Funding, Inc. 9,765,957.45 $ 7,234,042.55
Credit Suisse First Boston 9,765,957.45 $ 7,234,042.55
ABN Amro Bank N.V. 9,765,957.45 $ 7,234,042.55
BankBoston, N.A. 8,329,787.23 $ 6,170,212.77
Bank One/The First National Bank of Chicago 9,765,957.45 $ 7,234,042.55
Bank United 8,329,787.23 $ 6,170,212.77
Credit Lyonnais Americas New York Branch 9,765,957.45 $ 7,234,042.55
First Union National Bank 8,329,787.23 $ 6,170,212.77
Heller Financial 8,329,787.23 $ 6,170,212.77
The Industrial Bank of Japan, Limited 8,329,787.23 $ 6,170,212.77
The Mitsubishi Trust & Banking Corporation 8,329,787.23 $ 6,170,212.77
The Prudential Insurance Company of America 8,329,787.23 $ 6,170,212.77
Transamerica Business Credit Corporation 8,329,787.23 $ 6,170,212.77
Union Bank of California, N.A. 9,765,957.45 $ 7,234,042.55
Total 135,000,000.00 $100,000,000.00
</TABLE>
<PAGE>
SCHEDULE II
-----------
BANK ADDRESSES
--------------
<TABLE>
<CAPTION>
Bank Address
- ---- -------
<S> <C>
Bankers Trust Company One Bankers Trust Plaza
New York, New York 10006
Attention: Greg Shefrin
Telephone No.: (212) 250-2500
Facsimile No.: (212) 250-7218
ABN AMRO Bank N.V. Loan Administration
208 S. LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Milena Sopcic
Telephone No.: (312) 992-5096
Facsimile No.: (312) 992-5156
Bank United 3200 Southwest Freeway
Suite 1920
Houston, TX
Attn: Phillip Green
Telephone No.: (713) 543-6949
Facsimile No.: (713) 543-6651
BankBoston, N.A. Diversified Finance, MS 01-08-05
100 Federal Street
Boston, MA 02210
Attn: Kristin J. Kraska
Telephone No.: (617) 434-2079
Facsimile No.: (617) 434-4929
Credit Lyonnais Americas New York Branch 1301 Avenue of the Americas, 12/th/ Floor
New York, NY 10019
Attn: Oliver Tabouret
Telephone No.: (212) 261-3254
Facsimile No.: (212) 261-7338
</TABLE>
<PAGE>
Schedule II
page 2
Credit Suisse First Boston 11 Madison Avenue
New York, NY 10010
Attn: Robert Hetu
Telephone No.: (212) 325-4542
Facsimile No.: (212) 325-8309
The First National Bank of Chicago One First National Plaza
Mail Suite IL1-0324
Chicago, IL 60670
Attn: Colleen Muff
Telephone No.: (312) 732-9957
Facsimile No.: (312) 732-5297
First Union Capital Markets One South Penn Square
Widener Bldg-11/th/ Floor
PA 4827
Philadelphia, PA 19107
Attn: Roy O. Young
Telephone No.: (215) 973-5866
Facsimile No.: (215) 786-7704
Heller Financial 50 West Monroe Street
Chicago, IL 60661
Attn: Craig Galehugh
Telephone No.: (312) 441-7630
Facsimile No.: (312) 441-7367
IBJ, Ltd. 1251 Avenue of the Americas
New York, NY 10020-1104
Attn: Chris Droussiotis
Telephone No.: (212) 282-3323
Facsimile No.: (212) 282-4490
The Mitsubishi Trust & Banking Corporation 520 Madison Avenue, 26/th/ Floor
New York, NY 10022
Attn: Mildred Chiu
Telephone No.: (212) 891-8256
Facsimile No.: (212) 755-2349
Morgan Stanley Senior Funding, Inc. 1585 Broadway
New York, NY 10036
Attn: Hank D'Alessandro
Telephone No.: (212) 761-1051
Facsimile No.: (212) 761-0322
<PAGE>
Schedule II
page 2
Prudential 100 Mulberry Street
c/o Prudential Capital Group
Four Gateway Center
Newark, NJ 07102-4069
Attn: Janet Crowe
Telephone No.: (973) 802-9285
Facsimile No.: (973) 802-7045
Transamerica Business Credit Corporation 555 Theodore Fremd Avenue
Suite C-301
Rye, NY 10580
Attn: Stephen Goetschius
Telephone No.: (914) 925-7234
Facsimile No.: (914) 921-0110
Union Bank of California Union Bank of California
350 California Street, 6/th/ Floor
San Francisco, CA 94104
Attention: Alison A. Mason
Telephone No.: (415) 705-7452
Facsimile No.: (415) 705-7566
<PAGE>
SCHEDULE III
------------
REAL PROPERTIES
---------------
<PAGE>
SCHEDULE IV
-----------
SCHEDULED EXISTING INDEBTEDNESS
-------------------------------
<PAGE>
SCHEDULE V
----------
PLANS
-----
<PAGE>
SCHEDULE VI
-----------
EXISTING INVESTMENTS
--------------------
<PAGE>
SCHEDULE VII
------------
SUBSIDIARIES
------------
<PAGE>
SCHEDULE VII
------------
INSURANCE
---------
<PAGE>
SCHEDULE IX
-----------
EXISTING LIENS
--------------
Filing File
Location Debtor Secured Party Number FileDate of Collateral
- -------- ------ ------------- ------ -------- -------------
<PAGE>
SCHEDULE X
----------
CAPITALIZATION
--------------
<PAGE>
SCHEDULE XI
-----------
CONSOLIDATED EBITDA ADJUSTMENTS
-------------------------------
Relevant Fiscal
Quarter Ended
- -------------
June 30, 1999 $38,111.11
September 30, 1999 $28,888.89
December 30, 1999 $27,777.70
Each amount set forth above opposite a fiscal quarter to be included in the
relevant Test Period represents a per diem amount for such fiscal quarter.
Adjustments to Consolidated EBITDA pursuant to this Schedule shall only be made
in the case of any fiscal quarter set forth above for each day during such
fiscal quarter occurring after the Initial Borrowing Date.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
PACER INTERNATIONAL, INC. (f/k/a Land Transport
Services, Inc.)
By /s/ Lawrence C. Yarberry
-----------------------------
Title: Executive Vice President & Chief
Financial Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By: /s/ Anthony LoGrippo
-----------------------------
Title: Principal
MORGAN STANLEY SENIOR FUNDING, INC.,
Individually and as Syndication Agent
By: /s/ Henry F. D'Alessandro
-----------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON
Individually and as Documentation Agent
By: /s/ Karl M. Studer
-----------------------------
Title: Director
By: /s/ Robert Hetu
-----------------------------
Title: Vice President
<PAGE>
BANKBOSTON, N.A.
By: /s/ Carol Lovell
-----------------------------
Title: Managing Director
BANK UNITED
By: /s/ Phil Green
-----------------------------
Title: Director Commercial Syndications
ABN AMRO BANK N.V.
By: /s/ David J. Thomas
-----------------------------
Title: Group Vice President
By: /s/ Gerald F. Mackin
-----------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kenneth J. Kramer
-----------------------------
Title: Vice President
CREDIT LYONNAIS AMERICAS NEW YORK BRANCH
By: /s/ Attila Koc
-----------------------------
Title: Senior Vice President
-2-
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Roy O. Young
---------------------------
Title: Vice President
HELLER FINANCIAL
By: /s/ Robert M. Reeg
---------------------------
Title: Assistant Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: /s/ Takuya Honjo
---------------------------
Title: Senior Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Toshihiro Hayashi
---------------------------
Title: Senior Vice President
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ B. Ross Smead
---------------------------
Title: Vice President
-3-
<PAGE>
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Perry Vavoules
--------------------------
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison A. Mason
--------------------------
Title: Vice President
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
Pacer International Inc.,
(f/k/a Land Transport Services, Inc.),
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacer Logistics, Inc.,
(f/k/a Pacer International, Inc.),
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Cross Con Transport, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Cross Con Terminals, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
<PAGE>
Pacer International Rail Services LLC,
as an Assignor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacer International Consulting LLC,
as an Assignor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacer Rail Services LLC,
as an Assignor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacific Motor Transport Company,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
-2-
<PAGE>
Pacer Integrated Logistics, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
-----------------------
Title: Executive Vice President/CFO
PLM Acquisition Corporation,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Manufacturers Consolidation Service, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Keystone Terminals Acquisition Corp.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
-3-
<PAGE>
Interstate Consolidation Service, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Interstate Consolidation, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Intermodal Container Service, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Levcon, Inc., as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Manufacturers Consolidation Service of Canada,
Inc., as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
-4-
<PAGE>
Pacer Express, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Bankers Trust Company,
as Collateral Agent, as Assignee
By: /s/ Anthony LoGrippo
-----------------------
Title: Principal
-5-
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
Pacer Logistics, Inc.,
(f/k/a Pacer International, Inc.),
as a Guarantor
By: /s/ Lawrence Yarberry
----------------------
Title: Executive Vice President/CFO
Cross Con Transport, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Cross Con Terminals, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
<PAGE>
Pacer International Rail Services LLC,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Pacer International Consulting LLC,
as a Guarantor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Pacer Rail Services LLC,
as a Guarantor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Pacific Motor Transport Company,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
-2-
<PAGE>
Pacer Integrated Logistics, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
PLM Acquisition Corporation,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Manufacturers Consolidation Service, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Keystone Terminals Acquisition Corp.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
-3-
<PAGE>
Interstate Consolidation Service, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Interstate Consolidation, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Intermodal Container Service, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Levcon, Inc., as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
-4-
<PAGE>
Manufacturers Consolidation Service of Canada,
Inc., as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
Pacer Express, Inc.,
as a Guarantor
By: /s/ Lawrence Yarberry
---------------------
Title: Executive Vice President/CFO
-5-
<PAGE>
Accepted and Agreed to:
Bankers Trust Company,
as Administrative Agent for the Banks
By: /s/ Anthony LoGrippo
----------------------
Title: Principal
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
Pacer International Inc.,
(f/k/a Land Transport Services, Inc.),
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacer Logistics, Inc.,
(f/k/a Pacer International, Inc.),
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Cross Con Transport, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Cross Con Terminals, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
<PAGE>
Pacer International Rail Services LLC,
as an Assignor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacer International Consulting LLC,
as an Assignor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacer Rail Services LLC,
as an Assignor
By: Pacer Logistics, Inc., as manager
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Pacific Motor Transport Company,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
-2-
<PAGE>
Pacer Integrated Logistics, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
-----------------------
Title: Executive Vice President/CFO
PLM Acquisition Corporation,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Manufacturers Consolidation Service, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Keystone Terminals Acquisition Corp.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
-3-
<PAGE>
Interstate Consolidation Service, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Interstate Consolidation, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Intermodal Container Service, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Levcon, Inc., as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Manufacturers Consolidation Service of Canada,
Inc., as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
-4-
<PAGE>
Pacer Express, Inc.,
as an Assignor
By: /s/ Lawrence Yarberry
------------------------
Title: Executive Vice President/CFO
Bankers Trust Company,
as Collateral Agent, as Assignee
By: /s/ Anthony LoGrippo
-----------------------
Title: Principal
-5-
<PAGE>
Exhibit 4.2
================================================================================
PACER INTERNATIONAL, INC.,
as Issuer,
the GUARANTORS named herein,
as Guarantors,
and
WILMINGTON TRUST COMPANY,
as Trustee
__________________
INDENTURE
Dated as of May 28, 1999
__________________
$150,000,000
11 3/4% Senior Subordinated Notes due 2007
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1).................................................... 7.10
(a)(2).................................................... 7.10
(a)(3).................................................... N.A.
(a)(4).................................................... N.A.
(a)(5).................................................... 7.08; 7.10
(b)....................................................... 7.08; 7.10;
13.02
(c)....................................................... N.A.
311(a)....................................................... 7.11
(b)....................................................... 7.11
(c)....................................................... N.A.
312(a)....................................................... 2.05
(b)....................................................... 13.03
(c)....................................................... 13.03
313(a)....................................................... 7.06
(b)(1).................................................... 7.06
(b)(2).................................................... 7.06
(c)....................................................... 7.06; 13.02
(d)....................................................... 7.06
314(a)....................................................... 4.08; 4.10;
13.02
(b)....................................................... N.A.
(c)(1).................................................... 7.02; 13.04;
13.05
(c)(2).................................................... 7.02; 13.04;
13.05
(c)(3).................................................... N.A.
(d)....................................................... N.A.
(e)....................................................... 13.05
(f)....................................................... N.A.
315(a)....................................................... 7.01(b)
(b)....................................................... 7.05
(c)....................................................... 7.01
(d)....................................................... 6.05; 7.01(c)
316(a)(last sentence)........................................ 2.09
(a)(1)(A)................................................. 6.05
(a)(1)(B)................................................. 6.04
(a)(2).................................................... 9.05
(b)....................................................... 6.07
(c)....................................................... 9.05
317(a)(1).................................................... 6.08
(a)(2).................................................... 6.09
(b)....................................................... 2.04
318(a)....................................................... 13.01
(c)....................................................... 13.01
_____________________
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions........................................................................1
SECTION 1.02. Incorporation by Reference of TIA.................................................23
SECTION 1.03. Rules of Construction.............................................................23
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating...................................................................23
SECTION 2.02. Execution and Authentication......................................................23
SECTION 2.03. Registrar, Paying Agent and Calculation Agent.....................................23
SECTION 2.04. Paying Agent To Hold Assets in Trust..............................................23
SECTION 2.05. Holder Lists......................................................................23
SECTION 2.06. Transfer and Exchange.............................................................23
SECTION 2.07. Replacement Securities............................................................23
SECTION 2.08. Outstanding Securities............................................................23
SECTION 2.09. Treasury Securities...............................................................23
SECTION 2.10. Temporary Securities..............................................................23
SECTION 2.11. Cancellation......................................................................23
SECTION 2.12. Defaulted Interest................................................................23
SECTION 2.13. CUSIP Number......................................................................23
SECTION 2.14. Restrictive Legends...............................................................23
SECTION 2.15. Book-Entry Provisions for Global Security.........................................23
SECTION 2.16. Special Transfer Provisions.......................................................23
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee................................................................23
SECTION 3.02. Selection of Securities To Be Redeemed............................................23
SECTION 3.03. Notice of Redemption..............................................................23
SECTION 3.04. Effect of Notice of Redemption....................................................23
SECTION 3.05. Deposit of Redemption Price.......................................................23
SECTION 3.06. Securities Redeemed in Part.......................................................23
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.............................................................23
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 4.02. Maintenance of Office or Agency...................................................23
SECTION 4.03. Limitation on Restricted Payments.................................................23
SECTION 4.04. Limitation on Incurrence of Additional Indebtedness...............................23
SECTION 4.05. Corporate Existence...............................................................23
SECTION 4.06. Payment of Taxes and Other Claims.................................................23
SECTION 4.07. Maintenance of Properties and Insurance...........................................23
SECTION 4.08. Compliance Certificate; Notice of Default.........................................23
SECTION 4.09. Compliance with Laws..............................................................23
SECTION 4.10. Reports to Holders................................................................23
SECTION 4.11. Waiver of Stay, Extension or Usury Laws...........................................23
SECTION 4.12. Limitations on Transactions with Affiliates.......................................23
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries......23
SECTION 4.14. Limitation on Liens...............................................................23
SECTION 4.15. Change of Control.................................................................23
SECTION 4.16. Limitation on Asset Sales.........................................................23
SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt.............................23
SECTION 4.18. Additional Subsidiary Guarantees..................................................23
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets..........................................23
SECTION 5.02. Successor Corporation Substituted.................................................23
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.................................................................23
SECTION 6.02. Acceleration......................................................................23
SECTION 6.03. Other Remedies....................................................................23
SECTION 6.04. Waiver of Past Defaults...........................................................23
SECTION 6.05. Control by Majority...............................................................23
SECTION 6.06. Limitation on Suits...............................................................23
SECTION 6.07. Rights of Holders To Receive Payment..............................................23
SECTION 6.08. Collection Suit by Trustee........................................................23
SECTION 6.09. Trustee May File Proofs of Claim..................................................23
SECTION 6.10. Priorities........................................................................23
SECTION 6.11. Undertaking for Costs.............................................................23
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.................................................................23
SECTION 7.02. Rights of Trustee.................................................................23
SECTION 7.03. Individual Rights of Trustee......................................................23
SECTION 7.04. Trustee's Disclaimer..............................................................23
SECTION 7.05. Notice of Default.................................................................23
SECTION 7.06. Reports by Trustee to Holders.....................................................23
SECTION 7.07. Compensation and Indemnity........................................................23
SECTION 7.08. Replacement of Trustee............................................................23
SECTION 7.09. Successor Trustee by Merger, Etc..................................................23
SECTION 7.10. Eligibility; Disqualification.....................................................23
SECTION 7.11. Preferential Collection of Claims Against Company.................................23
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations..........................................23
SECTION 8.02. Legal Defeasance and Covenant Defeasance..........................................23
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.............................23
SECTION 8.04. Application of Trust Money........................................................23
SECTION 8.05. Repayment to the Company..........................................................23
SECTION 8.06. Reinstatement.....................................................................23
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders........................................................23
SECTION 9.02. With Consent of Holders...........................................................23
SECTION 9.03. Effect on Senior Debt.............................................................23
SECTION 9.04. Compliance with TIA...............................................................23
SECTION 9.05. Revocation and Effect of Consents.................................................23
SECTION 9.06. Notation on or Exchange of Securities.............................................23
SECTION 9.07. Trustee To Sign Amendments, Etc...................................................23
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinated to Senior Debt............................................23
SECTION 10.02. Suspension of Payment When Senior Debt Is in Default..............................23
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution,
Liquidation or Reorganization of Company.......................................23
SECTION 10.04. Payments May Be Paid Prior to Dissolution.........................................23
SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt......................23
SECTION 10.06. Obligations of the Company Unconditional..........................................23
SECTION 10.07. Notice to Trustee.................................................................23
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent....................23
SECTION 10.09. Trustee's Relation to Senior Debt.................................................23
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders
of Senior Debt.................................................................23
SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of Securities.......23
SECTION 10.12. This Article Ten Not To Prevent Events of Default.................................23
SECTION 10.13. Trustee's Compensation Not Prejudiced.............................................23
ARTICLE ELEVEN
GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee...........................................................23
SECTION 11.02. Limitations on Guarantees.........................................................23
SECTION 11.03. Execution and Delivery of Guarantee...............................................23
SECTION 11.04. Release of a Guarantor............................................................23
SECTION 11.05. Waiver of Subrogation.............................................................23
SECTION 11.06. Immediate Payment.................................................................23
SECTION 11.07. No Set-Off........................................................................23
SECTION 11.08. Obligations Absolute..............................................................23
SECTION 11.09. Obligations Continuing............................................................23
SECTION 11.10. Obligations Not Reduced...........................................................23
SECTION 11.11. Obligations Reinstated............................................................23
SECTION 11.12. Obligations Not Affected..........................................................23
SECTION 11.13. Waiver............................................................................23
SECTION 11.14. No Obligation To Take Action Against the Company..................................23
SECTION 11.15. Dealing with the Company and Others...............................................23
SECTION 11.16. Default and Enforcement...........................................................23
SECTION 11.17. Amendment, Etc....................................................................23
SECTION 11.18. Acknowledgment....................................................................23
SECTION 11.19. Costs and Expenses................................................................23
SECTION 11.20. No Merger or Waiver; Cumulative Remedies..........................................23
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.21. Survival of Obligations...........................................................23
SECTION 11.22. Guarantee in Addition to Other Obligations........................................23
SECTION 11.23. Severability......................................................................23
SECTION 11.24. Successors and Assigns............................................................23
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.......................23
SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default......23
SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt
on Dissolution, Liquidation or Reorganization of Such Guarantor................23
SECTION 12.04. Payments May Be Paid Prior to Dissolution.........................................23
SECTION 12.05. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of
Guarantor Senior Debt..........................................................23
SECTION 12.06. Obligations of the Guarantors Unconditional.......................................23
SECTION 12.07. Notice to Trustee.................................................................23
SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating Agent....................23
SECTION 12.09. Trustee's Relation to Guarantor Senior Debt.......................................23
SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or
Holders of Guarantor Senior Debt...............................................23
SECTION 12.11. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations....23
SECTION 12.12. This Article Twelve Not To Prevent Events of Default..............................23
SECTION 12.13. Trustee's Compensation Not Prejudiced.............................................23
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls......................................................................23
SECTION 13.02. Notices...........................................................................23
SECTION 13.03. Communications by Holders with Other Holders......................................23
SECTION 13.04. Certificate and Opinion as to Conditions Precedent................................23
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 13.05. Statements Required in Certificate or Opinion.....................................23
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.........................................23
SECTION 13.07. Legal Holidays....................................................................23
SECTION 13.08. Governing Law.....................................................................23
SECTION 13.09. No Adverse Interpretation of Other Agreements.....................................23
SECTION 13.10. No Recourse Against Others........................................................23
SECTION 13.11. Successors........................................................................23
SECTION 13.12. Duplicate Originals...............................................................23
SECTION 13.13. Severability......................................................................23
Signatures ............................................................................S-1
</TABLE>
Exhibit A - Form of Series A Note
Exhibit B - Form of Series B Note
Exhibit C - Form of Guarantee
Exhibit D - Form of Certificate for Transfers to Non-QIB
Accredited Investors
Exhibit E - Form of Certificate for Transfers Pursuant to
Regulation S
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture
-vi-
<PAGE>
INDENTURE dated as of May 28, 1999 among PACER INTERNATIONAL, INC., a
Tennessee corporation (the "Company"), as issuer, each of the Guarantors named
-------
herein, as Guarantors, and WILMINGTON TRUST COMPANY, as trustee (the "Trustee").
-------
The Company has duly authorized the creation of an issue of 11 3/4%
Senior Subordinated Notes due 2007 and, when and if issued as provided in the
Registration Rights Agreement, Series B Senior Subordinated Notes due 2007, and,
to provide therefor, the Company has duly authorized the execution and delivery
of this Indenture. All things necessary to make the Securities, when duly
issued and executed by the Company and authenticated and delivered hereunder,
the valid and binding obligations of the Company and to make this Indenture a
valid and binding agreement of the Company have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acceleration Notice" has the meaning set forth in Section 6.02.
-------------------
"Accredited Investor" has the meaning set forth in Section 2.16(a).
-------------------
"Acquired Indebtedness" means Indebtedness of a Person or any of its
---------------------
Subsidiaries (1) existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Restricted Subsidiaries or (2) assumed in connection with
the acquisition of assets from such Person, in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other
---------
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control"
-------
<PAGE>
-2-
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
----------- ----------
"Affiliate Transaction" has the meaning set forth in Section 4.12.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Agent Members" has the meaning set forth in Section 2.15.
-------------
"Apollo" means Apollo Management, L.P. and its Affiliates.
------
"Applicable Premium" means, with respect to a Security, the greater of
------------------
(i) 1.0% of the then outstanding principal amount of such Security and (ii)(a)
the present value of all remaining required interest and principal payments due
on such Security and all premium payments relating thereto assuming a redemption
date of June 1, 2003, computed using a discount rate equal to the Treasury Rate
plus 50 basis points, minus (b) the then outstanding principal amount of such
Security minus (c) accrued interest paid on the date of redemption.
"Asset Acquisition" means:
-----------------
(1) an Investment by the Company or any Restricted Subsidiary of the
Company in any other Person pursuant to which such Person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary of the
Company, or shall be merged with or into or consolidated with the Company
or any Restricted Subsidiary of the Company; or
(2) the acquisition by the Company or any Restricted Subsidiary of
the Company of the assets of any Person (other than a Restricted Subsidiary
of the Company) which constitute all or substantially all of the assets of
such Person or comprise any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary
course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
----------
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or
<PAGE>
-3-
other transfer for value by the Company or any of its Restricted Subsidiaries
(including any Sale and Leaseback Transaction) to any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company of (a) any
Capital Stock of any Restricted Subsidiary of the Company; or (b) any other
property or assets of the Company or any Restricted Subsidiary of the Company
other than in the ordinary course of business; provided, however, that Asset
-------- -------
Sales shall not include:
(1) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration of
less than $1.5 million;
(2) the sale or exchange of equipment in connection with the purchase
or other acquisition of other equipment, in each case used in the business
of the Company and its Restricted Subsidiaries;
(3) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company as permitted under
Section 5.01;
(4) disposals of equipment in connection with the reinvestment in or
the replacement of its equipment and disposals of worn-out or obsolete
equipment, in each case in the ordinary course of business of the Company
or its Restricted Subsidiaries;
(5) the sale of accounts receivable pursuant to a Qualified
Receivables Transaction;
(6) any Restricted Payment permitted by Section 4.03 or that
constitutes a Permitted Investment; and
(7) one or more Sale and Leaseback Transactions for which the Company
or any Restricted Subsidiary of the Company receives aggregate
consideration from all such Sale and Leaseback Transactions of less than
$15.0 million.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors
------------------
of such Person or any duly authorized committee thereof.
<PAGE>
-4-
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
------------
other day on which banking institutions in The City of New York or The State of
Delaware are required or authorized by law or other governmental action to be
closed.
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means:
-------------
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person or options to purchase the
same; and
(2) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Cash Equivalents" means:
----------------
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either
<PAGE>
-5-
Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's");
--- -------
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250.0 million;
(5) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in clause
(4) above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the
-----------------
following events:
(1) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with
-----
any Affiliates thereof (whether or not otherwise in compliance with the
provisions of this Indenture), other than the Permitted Holders;
(2) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company
(whether or not otherwise in compliance with the provisions of this
Indenture);
(3) any Person or Group (other than the Permitted Holders) shall
become the owner, directly or indirectly, beneficially or of record, of
shares representing more than 50% of the aggregate ordinary voting power
repre-
<PAGE>
-6-
sented by the issued and outstanding Capital Stock of the Company; or
(4) the replacement of a majority of the Board of Directors of the
Company over a two-year period from the directors who constituted the Board
of Directors of the Company at the beginning of such period, and such
replacement shall not have been approved by the Permitted Holders or a vote
of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"Change of Control Date" has the meaning set forth in Section 4.15.
----------------------
"Change of Control Offer" has the meaning set forth in Section 4.15.
-----------------------
"Change of Control Payment Date" has the meaning set forth in Section
------------------------------
4.15.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
-------
successor replaces it pursuant to this Indenture and thereafter shall mean such
successor corporation.
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby,
(a) all income taxes of such Person and its Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes
<PAGE>
-7-
attributable to extraordinary, unusual or nonrecurring gains or
losses),
(b) Consolidated Interest Expense, and
(c) Consolidated Non-cash Charges less any non-cash items
----
increasing Consolidated Net Income for such period,
all as determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP as applicable.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
----------------------------------------
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
-------------------
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
----------------
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
---
forma basis (consistent with the provisions below) for the period of such
- -----
calculation to:
(1) the incurrence or repayment of any Indebtedness of such Person or
any of its Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness
in the ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the
first day of the Four Quarter Period;
(2) any asset sales or other dispositions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of such Person or one of its
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired In-
<PAGE>
-8-
debtedness and also including any Consolidated EBITDA (including any pro
---
forma expense and cost reductions, adjustments and other operating
-----
improvements or synergies both achieved by such Person during such period
and to be achieved by such Person and with respect to the acquired assets,
all as determined in good faith by a responsible financial or accounting
officer of the Company and as reported on or otherwise confirmed,
consistent with applicable standards of the American Institute of Certified
Public Accountants, to the Company by an independent accounting firm)
attributable to the assets which are the subject of the Asset Acquisition
or asset sale or other disposition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the
last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such asset sale or other disposition or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall
give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness; and
(3) all adjustments used in connection with the calculation of
adjusted EBITDA as set forth in the Offering Memorandum dated May 24, 1999
relating to the issuance of the Securities on the Issue Date to the extent
such adjustments are not fully reflected in such Four Quarter Period and
continue to be applicable.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes
of determining the denominator (but not the numerator) of this "Consolidated
Fixed Charge Coverage Ratio,"
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; and
(2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to
<PAGE>
-9-
Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
--------------------------
period, the sum, without duplication, of:
(1) Consolidated Interest Expense (excluding amortization or write-
off of deferred financing costs), plus
(2) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
during such period times (y) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as
a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including without limitation, (a) any amortization
of debt discount and amortization or write-off of deferred financing costs
(including the amortization of costs relating to interest rate caps or
other similar agreements), (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of
any deferred payment obligation; and
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP, minus interest income for such period.
"Consolidated Net Income" means, with respect to any Person for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
--------
(1) after-tax gains or losses from Asset Sales (without regard to the
$1.5 million limitation set forth
<PAGE>
-10-
in the definition thereof) or abandonments or reserves relating thereto;
(2) after-tax items classified as extraordinary or nonrecurring gains
or losses;
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
the referent Person or is merged or consolidated with the referent Person
or any Restricted Subsidiary of the referent Person;
(4) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is prohibited by
contract, operation of law or otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary
of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person by such Person;
(6) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued); and
(7) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to any Person for
-----------------------------
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Covenant Defeasance" has the meaning set forth in Section 8.02.
-------------------
"Credit Agreement" means the Credit Agreement dated as of the Issue
----------------
Date, among the Company, the lenders party thereto in their capacities as
lenders thereunder and Bankers
<PAGE>
-11-
Trust Company, as administrative agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
-------
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Default Notice" has the meaning set forth in Section 10.02.
--------------
"Depository" shall mean The Depository Trust Company, New York, New
----------
York, or a successor thereto registered under the Exchange Act or other
applicable statute or regulation.
"Designated Senior Debt" means:
----------------------
(1) Indebtedness under or in respect of the Credit Agreement; and
(2) any other Indebtedness constituting Senior Debt which, at the
time of determination, has an aggregate principal amount of at least $25.0
million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock
--------------------------
which, by its terms (or by the terms of any
<PAGE>
-12-
security into which it is convertible or for which it is exchangeable at the
option of the holder thereof), or upon the happening of any event (other than an
event which would constitute a Change of Control or Asset Sale), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control or Asset Sale), on or prior to the
final maturity date of the Securities; provided that the Pacer Preferred Stock
--------
and any Capital Stock having substantially the same terms issued in exchange
therefor shall not be deemed to be Disqualified Capital Stock.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary
------------------------------
incorporated or otherwise organized or existing under the laws of the United
States, any state thereof or any territory or possession of the United States.
"Equity Investment" means the equity investment (in the form of the
-----------------
issuance, rollover and exchange of Pacer International, Inc.'s and Pacer
Logistics, Inc.'s equity securities) in the Company of approximately $133.0
million.
"Equity Offering" means a public or private offering of Qualified
---------------
Capital Stock (other than public offerings with respect to the Company's Common
Stock on Form S-8) of the Company for aggregate net cash proceeds to the Company
of at least $20.0 million.
"Event of Default" has the meaning set forth in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"Exchange Notes" means the 11 3/4% Series B Senior Subordinated Notes
--------------
due 2007 (the terms of which are identical to the Initial Notes except that,
unless any Exchange Notes shall be issued as Private Exchange Notes (as defined
in the Registration Rights Agreement), the Exchange Notes shall be registered
under the Securities Act, and shall not contain the restrictive legend on the
face of the form of the Initial Notes), to be issued in exchange for the Initial
Notes pursuant to the registered Exchange Offer and a Private Exchange (as
defined in the Registration Rights Agreement).
"Exchange Offer" means the registration by the Company under the
--------------
Securities Act pursuant to a registration state-
<PAGE>
-13-
ment of the offer by the Company to each Holder of the Initial Notes to exchange
all the Initial Notes held by such Holder for the Exchange Notes in an aggregate
principal amount equal to the aggregate principal amount of the Initial Notes
held by such Holder, all in accordance with the terms and conditions of the
Registration Rights Agreement.
"fair market value" means, with respect to any asset or property, the
-----------------
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Security" shall mean a Security which is executed by the
---------------
Company and authenticated and delivered by the Trustee to the Depository or
pursuant to the Depository's instruction, all in accordance with this Indenture
and pursuant to a written order, which shall be registered in the name of the
Depository or its nominee.
"Guarantees" means the guarantees of the Securities of the Company by
----------
the Guarantors pursuant to this Indenture.
"Guarantor" means:
---------
(1) each of the Company's Domestic Restricted Subsidiaries on the
Issue Date; and
(2) each of the Company's Domestic Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of this Indenture as a
Guarantor;
provided that any Person constituting a Guarantor as described above shall cease
- --------
to constitute a Guarantor when its respective
<PAGE>
-14-
Guarantee is released in accordance with the terms of this Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor, the
---------------------
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on, and all other amounts owing by any Guarantor in respect of,
(x) all monetary obligations of every nature of a Guarantor under, or
with respect to, the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities (including guarantees
thereof);
(y) all Interest Swap Obligations (including guarantees thereof); and
(z) all obligations under Currency Agreements (including guarantees
thereof), in each case whether outstanding on the Issue Date or thereafter
incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not
include:
(1) any Indebtedness of such Guarantor to a Restricted Subsidiary of
such Guarantor;
(2) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of such Guarantor or any Restricted Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation);
<PAGE>
-15-
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or
owing by such Guarantor;
(6) that portion of any Indebtedness incurred in violation of the
provisions set forth under Section 4.04 (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (6) if
the holder(s) of such obligation or their representative shall have
received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving
credit Indebtedness, that the incurrence of the entire committed amount
thereof at the date on which the initial borrowing thereunder is made would
not) violate such provisions of this Indenture);
(7) any Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is
without recourse to the Company or any Guarantor; and
(8) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of such Guarantor.
"incur" has the meaning set forth in Section 4.04.
-----
"Indebtedness" means with respect to any Person, without duplication:
------------
(1) all Obligations of such Person for borrowed money, including,
without limitation, Senior Debt;
(2) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all condi-
<PAGE>
-16-
tional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business);
(5) all Obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent Obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause (8)
below;
(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any Lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured;
(8) all Obligations under currency agreements and interest swap
agreements of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock. For purposes of Section 4.04, in determining the principal amount of any
Indebtedness to be incurred by the Company or a Guarantor or which is
outstanding at any date, the principal amount of any Indebtedness which provides
that an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be the accreted value thereof at the
date of determination.
<PAGE>
-17-
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm:
-----------------------------
(1) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in the
Company; and
(2) which, in the judgment of the Board of Directors of the Company,
is otherwise independent and qualified to perform the task for which it is
to be engaged.
"Initial Notes" means the 11 3/4% Series A Senior Subordinated Notes
-------------
due 2007 of the Company issued on the Issue Date and authenticated and delivered
under this Indenture pursuant to Section 2.02 of this Indenture and any other
notes (other than Exchange Notes) issued after the Issue Date in accordance with
clause (iii) of the fourth paragraph of Section 2.02.
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person
-------------------------
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the
<PAGE>
-18-
Company or such Restricted Subsidiary, as the case may be. For purposes of
Section 4.03:
(1) "Investment" shall include and be valued at the fair market value
of the net assets of any Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary of
the Company and shall exclude the fair market value of the net assets of
any Unrestricted Subsidiary of the Company at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company; and
(2) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or
any of its Restricted Subsidiaries, without any adjustments for increases
or decreases in value, or write-ups, write-downs or write-offs with respect
to such Investment, reduced by the payment of dividends or distributions in
connection with such Investment or any other amounts received in respect of
such Investment; provided that no such payment of dividends or
--------
distributions or receipt of any such other amounts shall reduce the amount
of any Investment if such payment of dividends or distributions or receipt
of any such amounts would be included in Consolidated Net Income.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Restricted Subsidiary of
the Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, 100.0% of the outstanding Common
Stock of such Restricted Subsidiary, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means May 28, 1999, the date of original issuance of the
----------
Initial Notes.
"Legal Defeasance" has the meaning set forth in Section 8.02.
----------------
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
<PAGE>
-19-
"Management Agreement" means the Management Agreement dated as of the
--------------------
Issue Date between the Company and Apollo.
"Maturity Date" means June 1, 2007.
-------------
"Net Cash Proceeds" means, with respect to any Asset Sale, the
-----------------
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(3) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale; and
(4) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.16.
------------------
"Net Proceeds Offer Amount" has the meaning set forth in Section 4.16.
-------------------------
"Net Proceeds Offer Payment Date" has the meaning set forth in Section
-------------------------------
4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth in Section
-------------------------------
4.16.
<PAGE>
-20-
"Non-payment Default" has the meaning set forth in Section 10.02.
-------------------
"Obligations" means all obligations for principal, premium, interest,
-----------
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering" means the offering of the Initial Notes.
--------
"Officer" means, with respect to any Person, the Chairman of the
-------
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, or the Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers of
---------------------
the Company or of a Guarantor, as applicable.
"Opinion of Counsel" means a written opinion from legal counsel, which
------------------
opinion and counsel are reasonably acceptable to the Trustee.
"Option Plan" means the Company's 1999 Stock Option Plan with respect
-----------
to an aggregate of no more than 1.8 million shares of the Company's Common Stock
and Pacer Preferred Stock.
"Pacer Preferred Stock" means the Perpetual Participating Exchangeable
---------------------
Preferred Stock of Pacer Logistics, Inc. as in effect on the Issue Date.
"Paying Agent" has the meaning set forth in Section 2.03.
------------
"Payment Blockage Period" has the meaning set forth in Section 10.02.
-----------------------
"Payment Default" has the meaning set forth in Section 10.02.
---------------
"Permitted Holders" means (i) Apollo and (ii) members of senior
-----------------
management of the Company and its Subsidiaries.
"Permitted Indebtedness" means, without duplication, each of the
----------------------
following:
(1) Indebtedness under the Securities and the Guarantees in an
aggregate principal amount not to exceed $150.0 million;
<PAGE>
-21-
(2) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $235.0
million less the amount of all repayments of term debt and permanent
commitment reductions under the Credit Agreement with Net Cash Proceeds of
Asset Sales applied thereto as required by Section 4.16; provided, that the
--------
aggregate principal amount of Indebtedness permitted to be incurred from
time to time under this clause (2) shall be reduced dollar for dollar by
the amount of any Indebtedness then outstanding under clause (12) below;
(3) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions therein;
(4) Interest Swap Obligations of the Company or any Restricted
Subsidiaries of the Company covering Indebtedness of the Company or any of
its Restricted Subsidiaries and Interest Swap Obligations of any Restricted
Subsidiary of the Company covering Indebtedness of the Company or such
Restricted Subsidiary; provided, however, that such Interest Swap
-------- -------
Obligations are entered into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred
in accordance with this Indenture to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligation relates;
(5) Indebtedness under Currency Agreements; provided that in the case
--------
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(6) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company, a Wholly Owned Restricted
Subsidiary of the Company or the lenders or collateral agent under the
Credit Agreement, in each case subject to no Lien held by a Person other
than the Company, a Wholly Owned Restricted Subsidiary of the Company or
the lenders or
<PAGE>
-22-
collateral agent under the Credit Agreement; provided that if as of any
--------
date any Person other than the Company, a Wholly Owned Restricted
Subsidiary of the Company or the lenders or collateral agent under the
Credit Agreement owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(7) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company or the lenders or the
collateral agent under the Credit Agreement and is subject to no Lien other
than a Lien in favor of the lenders or collateral agent under the Credit
Agreement; provided that (a) any Indebtedness of the Company to any Wholly
--------
Owned Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under this
Indenture and the Securities and (b) if as of any date any Person other
than a Wholly Owned Restricted Subsidiary of the Company or the lenders or
collateral agent under the Credit Agreement owns or holds any such
Indebtedness or any Person holds a Lien (other than a Lien in favor of the
lenders or collateral agent under the Credit Agreement) in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;
(8) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within two Business Days of incurrence;
(9) Indebtedness of the Company or any of its Restricted Subsidiaries
in respect of performance bonds, bankers' acceptances, workers'
compensation claims, surety or appeal bonds, payment obligations in
connection with self-insurance or similar obligations, and bank overdrafts
(and letters of credit in respect thereof);
(10) Indebtedness represented by Capitalized Lease Obligations,
Purchase Money Indebtedness or Acquired Indebtedness of the Company and its
Restricted Subsidiaries incurred in the ordinary course of business not to
exceed
<PAGE>
-23-
$25.0 million at any one time outstanding; provided that all or a portion
--------
of the $25.0 million permitted to be incurred under this clause (10) may,
at the option of the Company, be incurred under the Credit Agreement or
pursuant to clause (14) below (in addition to the $25.0 million set forth
therein) instead of pursuant to Capitalized Lease Obligations, Purchase
Money Indebtedness or Acquired Indebtedness;
(11) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price or similar obligations, in each case, incurred
or assumed in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition; provided, however, that:
-------- -------
(a) such Indebtedness is not reflected on the balance sheet of
the Company or any Restricted Subsidiary of the Company (contingent
obligations referred to in a footnote to financial statements and not
otherwise reflected on the balance sheet will not be deemed to be
reflected on such balance sheet for purposes of this clause (a)); and
(b) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including non-
cash proceeds (the fair market value of such non-cash proceeds being
measured at the time they are received and without giving effect to
any subsequent changes in value) actually received by the Company and
its Restricted Subsidiaries in connection with such disposition;
(12) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction that is without recourse to the Company
or to any Restricted Subsidiary of the Company or their assets (other than
such Receivables Subsidiary and its assets), and is not guaranteed by any
such Person; provided that any outstanding Indebtedness incurred under this
--------
clause (12) shall reduce (for so long as, and to the extent that, the
Indebtedness referred to in this clause (12) remains outstanding) the
aggregate amount permitted to be incurred under clause (2) above to the
extent set forth therein;
<PAGE>
-24-
(13) Refinancing Indebtedness; and
(14) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $25.0 million
at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under the Credit Agreement) plus up to an additional $25.0
million as contemplated by, and to the extent not incurred under, clause
(10) above .
For purposes of determining compliance with Section 4.04, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (1) through (14) above
or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio provisions of such Section, the Company shall, in its sole discretion,
classify (or later reclassify) such item of Indebtedness in any manner that
complies with such Section. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Capital Stock in the form of additional shares of the same class of
Disqualified Capital Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Capital Stock for purposes of
Section 4.04.
"Permitted Investments" means:
---------------------
(1) Investments by the Company or any Restricted Subsidiary of the
Company in any Person that is or will become immediately after such
Investment a Wholly Owned Restricted Subsidiary of the Company or that will
merge or consolidate into the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided that such Wholly Owned Restricted
--------
Subsidiary of the Company is not restricted from making dividends or
similar distributions by contract, operation of law or otherwise;
(2) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is
--------
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Securities and this Indenture;
(3) Investments in cash and Cash Equivalents;
<PAGE>
-25-
(4) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona
fide business purposes not to exceed $4.0 million at any one time
outstanding;
(5) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with this Indenture;
(6) additional Investments (including joint ventures) not to exceed
$25.0 million at any one time outstanding;
(7) Investments in securities of trade creditors or customers
received (a) pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers or
(b) in settlement of delinquent obligations of, and other disputes with,
customers, suppliers and others, in each case arising in the ordinary
course of business or otherwise in satisfaction of a judgment;
(8) Investments (a) made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection with an
Asset Sale made in compliance with Section 4.16; or (b) acquired in
exchange for, or out of the proceeds of, a substantially concurrent
offering of Capital Stock (other than Disqualified Capital Stock) of the
Company (which proceeds of any such offering of Capital Stock of the
Company shall not have been, and shall not be, included in clause (3)(b) of
the first paragraph of Section 4.03);
(9) Investments of a Person or any of its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary of the Company or at
the time such Person merges or consolidates with the Company or any of its
Restricted Subsidiaries, in either case in compliance with this Indenture;
provided that such Investments were not made by such Person in connection
--------
with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such merger or consolidation; and
(10) Investments in the Securities or Pacer Preferred Stock.
<PAGE>
-26-
"Permitted Liens" means the following types of Liens:
---------------
(1) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen, customs and revenue
authorities and other Liens imposed by law incurred in the ordinary course
of business for sums not yet delinquent or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect thereof;
(3) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(4) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(5) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or asset
--------
which is not leased property subject to such Capitalized Lease Obligation;
<PAGE>
-27-
(7) Liens securing Indebtedness permitted pursuant to clause (10) of
the definition of "Permitted Indebtedness"; provided, however, that in the
-------- -------
case of Purchase Money Indebtedness (a) the Indebtedness shall not exceed
the cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired or constructed and
(b) the Lien securing such Indebtedness shall be created within 180 days of
such acquisition or construction or, in the case of a refinancing of any
Purchase Money Indebtedness, within 180 days of such refinancing;
(8) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances or similar credit transactions issued or created for
the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods;
(9) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(12) Liens in the ordinary course of business not exceeding $5.0
million at any one time outstanding that (a) are not incurred in connection
with borrowing of money and (b) do not materially detract from the value of
the property or materially impair its use;
(13) Liens by reason of judgment or decree not otherwise resulting in
an Event of Default;
(14) Liens securing Indebtedness permitted to be incurred pursuant to
clauses (12) and (14) of the definition of "Permitted Indebtedness";
<PAGE>
-28-
(15) Liens securing Indebtedness under Currency Agreements permitted
under this Indenture; and
(16) Liens securing Acquired Indebtedness incurred in accordance with
Section 4.04 (including, without limitation, clause (10) of the definition
of "Permitted Indebtedness"); provided that:
--------
(a) such Liens secured such Acquired Indebtedness at the time of
and prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company and were not granted
in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company; and
(b) such Liens do not extend to or cover any property or assets
of the Company or any of its Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or
a Restricted Subsidiary of the Company and are no more favorable to
the lienholders than those securing the Acquired Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company.
"Person" means an individual, partnership, corporation, limited
------
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Securities" has the meaning provided in Section 2.01.
-------------------
Physical Securities are sometimes referred to herein as certificated Securities.
"Preferred Stock" of any Person means any Capital Stock of such Person
---------------
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Notes in the form set forth in the first paragraph of Section 2.14.
<PAGE>
-29-
"Purchase Money Indebtedness" means Indebtedness of the Company and
---------------------------
its Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment and any
Refinancing thereof.
"QIB" means any "qualified institutional buyer" (as defined under the
---
Securities Act).
"Qualified Capital Stock" means any Capital Stock that is not
-----------------------
Disqualified Capital Stock.
"Qualified Receivables Transaction" means any transaction or series of
---------------------------------
transactions that may be entered into by the Company or any of its Restricted
Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries
may sell, convey or otherwise transfer to (1) a Receivables Subsidiary (in the
case of a transfer by the Company or any of its Restricted Subsidiaries) and (2)
any other Person (in the case of a transfer by a Receivables Subsidiary), or may
grant a security interest in, any accounts receivable (whether now existing or
arising in the future) of the Company or any of its Restricted Subsidiaries, and
any assets related thereto including, without limitation, all collateral
securing such accounts receivable, all contracts and all guarantees or other
obligations in respect of such accounts receivable, proceeds of such accounts
receivable and other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable.
"Recapitalization" means the recapitalization of the Company on the
----------------
Issue Date.
"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of
----------------------
the Company that engages in no activities other than in connection with the
financing of accounts receivable and that is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary:
(1) no portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which (a) is guaranteed by the Company or any
Restricted Subsidiary of the Company (excluding guarantees of Obligations
(other than the principal of, and interest on, Indebtedness) pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connec-
<PAGE>
-30-
tion with a Qualified Receivables Transaction), (b) is recourse to or
obligates the Company or any Restricted Subsidiary of the Company in any
way other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction or (c) subjects any property or
asset of the Company or any Restricted Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction;
(2) with which neither the Company nor any Restricted Subsidiary of
the Company has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing accounts
receivable; and
(3) with which neither the Company nor any Restricted Subsidiary of
the Company has any obligation to maintain or preserve such Restricted
Subsidiary's financial condition or cause such Restricted Subsidiary to
achieve certain levels of operating results.
Any such designation by the Board of Directors of the Company shall be evidenced
to the Trustee by filing with the Trustee a Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Record Date" means the applicable record date specified in the
-----------
Securities.
"Redemption Date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to be
----------------
redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
<PAGE>
-31-
"Reference Date" has the meaning set forth in Section 4.03.
--------------
"Refinance" means, in respect of any security or Indebtedness, to
---------
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
------------------------
Restricted Subsidiary of the Company of (A) for purposes of clause (13) of the
definition of Permitted Indebtedness, Indebtedness incurred or existing in
accordance with Section 4.04 (other than pursuant to clause (2), (4), (5), (6),
(7), (8), (9), (10), (11), (12) or (14) of the definition of Permitted
Indebtedness) or (B) for any other purpose, Indebtedness incurred in accordance
with Section 4.04, in each case that does not:
(1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing); or
(2) create Indebtedness with (a) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced or (b) a final maturity earlier than the final maturity of
the Indebtedness being Refinanced; provided that (x) if such Indebtedness
--------
being Refinanced is Indebtedness solely of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and
(y) if such Indebtedness being Refinanced is subordinate or junior to the
Securities, then such Refinancing Indebtedness shall be subordinate to the
Securities at least to the same extent and in the same manner as the
Indebtedness being Refinanced.
"Registrar" has the meaning set forth in Section 2.03.
---------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of the Issue Date by and among the Company, the Guarantors
and the placement agents.
<PAGE>
-32-
"Replacement Assets" has the meaning set forth in Section 4.16.
------------------
"Representative" means the indenture trustee or other trustee, agent
--------------
or representative in respect of any Designated Senior Debt; provided that if,
--------
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Responsible Officer" means, when used with respect to the Trustee,
-------------------
any officer in the corporate trust office of the Trustee with direct
responsibility for the administration of this Indenture or to whom any corporate
trust matter is referred because of such officer's knowledge of and familiarity
with the particular subject.
"Restricted Payment" has the meaning set forth in Section 4.03.
------------------
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
--------
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Security constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
---------------------
Person which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such property.
"Securities" means the Initial Notes, the Exchange Notes and any other
----------
notes issued after the Issue Date in accordance with clause (iii) of the fourth
paragraph of Section 2.02 treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
<PAGE>
-33-
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor statute or statutes thereto.
"Securityholder" or "Holder" means the Person in whose name a Security
-------------- ------
is registered on the Registrar's books.
"Senior Debt" means the principal of, premium, if any, and interest
-----------
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing by the Company in respect of,
(x) all monetary obligations of every nature of the Company under, or
with respect to, the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities;
(y) all Interest Swap Obligations (including guarantees thereof); and
(z) all obligations under Currency Agreements (including guarantees
thereof), in each case whether outstanding on the Issue Date or thereafter
incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(1) any Indebtedness of the Company to a Subsidiary of the Company;
(2) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation);
<PAGE>
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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 the Company;
(6) that portion of any Indebtedness incurred in violation of Section
4.04 (but, as to any such obligation, no such violation shall be deemed to
exist for purposes of this clause (6) if the holder(s) of such obligation
or their representative shall have received an Officers' Certificate of the
Company to the effect that the incurrence of such Indebtedness does not
(or, in the case of revolving credit Indebtedness, that the incurrence of
the entire committed amount thereof at the date on which the initial
borrowing thereunder is made would not) violate such provisions of this
Indenture);
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company; and
(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of the Company.
"Shareholders' Agreement" means the Shareholders' Agreement dated as
-----------------------
of the Issue Date among certain Affiliates of Apollo, APL Limited and APL Land
Transport Services, Inc.
"Significant Subsidiary" with respect to any Person, means any
----------------------
Restricted Subsidiary of such Person that satisfies the criteria for a
"Significant Subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
"Subsidiary", with respect to any Person, means:
----------
(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such Person; or
<PAGE>
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(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth in Section 5.01.
----------------
"TIA" means the Trust Indenture act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of the execution of this Indenture
until such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA, except
as otherwise provided in Section 9.04.
"Transactions" means the Offering, the Recapitalization, the Equity
------------
Investment and the related borrowings under the Credit Agreement.
"Treasury Rate" means the rate per annum equal to the yield to
-------------
maturity at the time of computation of United States Treasury securities with a
constant maturity selected by the Calculation Agent (which shall initially be
the Trustee) most nearly equal to the period from such date of redemption to
June 1, 2003; provided, however, that if the period from such date of redemption
-------- -------
to June 1, 2003 is not equal to the constant maturity of the United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the period from such date of
redemption to June 1, 2003 is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" of any Person means (1) any Subsidiary of
-----------------------
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (2) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any
<PAGE>
-36-
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided that (x) the Company certifies to the Trustee in
--------
an Officers' Certificate that such designation complies with Section 4.03 and
(y) each Subsidiary to be so designated and each of its Subsidiaries has not at
the time of designation, and does not thereafter, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x)
immediately after giving effect to such designation, the Company is able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.04 and (y) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
---------------------------
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged and which
are not callable or redeemable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (1) the then
outstanding aggregate principal amount of such Indebtedness into (2) the sum of
the total of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
----------------------------------
Restricted Subsidiary of such Person of which all the
<PAGE>
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outstanding voting securities (other than in the case of a foreign Restricted
Subsidiary, directors' qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable law) are owned by
such Person or any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
--------------------
"indenture security holder" means a Holder or a Securityholder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
"obligor" on the indenture securities means the Company, any Guarantor
-------
or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
<PAGE>
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(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A and the Exchange Notes and the
---------
Trustee's certificate of authentication shall be substantially in the form of
Exhibit B. The Securities may have notations, legends or endorsements required
- ---------
by law, stock exchange rule or usage. The Company and the Trustee shall approve
the form of the Securities and any notation, legend or endorsement on them.
Each Security shall be dated the date of its authentication. At the time of
issuance, each Security shall have an executed Guarantee from each of the then
existing Guarantors endorsed thereon substantially in the form of Exhibit C.
---------
The terms and provisions contained in the Securities, annexed hereto
as Exhibits A and B, and the Guarantees shall constitute, and are hereby
---------- -
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Securities in registered
form, substantially in the form set forth in Exhibit A, deposited with the
---------
Trustee, as custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided, and shall bear the legends
set forth in Section 2.14. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Securities issued in exchange for interests in the Global Securities
pursuant to Section 2.15 may be issued in the form of permanent certificated
Securities in registered form
<PAGE>
-39-
(the "Physical Securities") and shall bear the first legend set forth in Section
-------------------
2.14. All Securities offered and sold in reliance on Regulation S shall remain
in the form of a Global Security until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue on
the Issue Date in the aggregate principal amount not to exceed $150,000,000,
(ii) pursuant to the Exchange Offer, Exchange Notes from time to time for issue
only in exchange for a like principal amount of Initial Notes and (iii) subject
to compliance with Section 4.04, one or more series of Securities for original
issue after the Issue Date (such Securities to be substantially in the form of
Exhibit A or B, as the case may be) in an unlimited amount (and if in the form
- --------- -
of Exhibit A the same principal amount of Exchange Notes in exchange therefor
---------
upon consummation of a registered exchange offer), in each case upon written
orders of the Company in the form of an Officers' Certificate, which Officers'
Certificate shall, in the case of any issuance pursuant to clause (iii) above,
certify that such issuance is in compliance with Section 4.04. In addition,
each such Officers' Certificate shall specify the amount of Securities to be
authenticated, the date on which the Securities are to be authenticated, whether
the Securities are to be Initial Notes, Exchange Notes or Securities issued
under clause (iii) of the preceding sentence and the aggregate principal amount
of Securities outstanding on the date of authentication, and shall further
specify the amount of such
<PAGE>
-40-
Securities to be issued as a Global Security or Physical Securities. Such
Securities shall initially be in the form of one or more Global Securities,
which (i) shall represent, and shall be denominated in an amount equal to the
aggregate principal amount of, the Securities to be issued, (ii) shall be
registered in the name of the Depository for such Global Security or Securities
or its nominee and (iii) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instruction.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof.
SECTION 2.03. Registrar, Paying Agent and Calculation Agent.
---------------------------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
---------
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
------------
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company may also from time to time designate one
or more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
-------- -------
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company may act as its own Registrar, Paying Agent or Calculation Agent except
that for the purposes of Articles Three and Eight and Sections 4.15 and 4.16,
neither the Company nor any Affiliate of the Company shall act as Paying Agent.
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more co-
Registrars and one or more additional paying agents reasonably acceptable to the
Trustee. The term "Paying Agent" includes any additional paying agent. The
<PAGE>
-41-
Company hereby initially appoints the Trustee as Registrar, Paying Agent and
Calculation Agent until such time as the Trustee has resigned or a successor has
been appointed.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Article Ten and Article Twelve, each Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of, or interest on, the
Securities (whether such assets have been distributed to it by the Company or
any other obligor on the Securities), and shall notify the Trustee of any
Default or Event of Default by the Company (or any other obligor on the
Securities) in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate such assets and hold them as a separate trust
fund. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default or payment
Event of Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
SECTION 2.05. Holder Lists.
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each Interest Payment Date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
<PAGE>
-42-
SECTION 2.06. Transfer and Exchange.
---------------------
(a) Subject to the provisions of Sections 2.14 and 2.15, when
Securities are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such Securities for an
equal principal amount of Securities of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; provided, however,
-------- -------
that the Securities surrendered for registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar or co-Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Sections 2.02, 2.10, 3.06, 4.15, 4.16 or
9.06). The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing, (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Security being redeemed in part, and (iii) during
a Change of Control Offer or a Net Proceeds Offer if such Security is tendered
pursuant to such Change of Control Offer or Net Proceeds Offer and not
withdrawn. A Global Security may be transferred, in whole but not in part, in
the manner provided in this Section 2.06(a), only to a nominee of the Depository
for such Global Security, or to the Depository, or a successor Depository for
such Global Security selected or approved by the Company, or to a nominee of
such successor Depository.
(b) If at any time the Depository for the Global Security or
Securities notifies the Company that it is unwilling or unable to continue as
Depository for such Global Security or Securities or the Company becomes aware
that the Depository has ceased to be a clearing agency registered under the
Exchange Act, the Company shall appoint a successor Depository with respect to
such Global Security or Securities. If a successor Depository for such Global
Security or Securities has not been
<PAGE>
-43-
appointed within 120 days after the Company receives such notice or becomes
aware of such ineligibility, the Company shall execute, and the Trustee, upon
receipt of an Officers' Certificate for the authentication and delivery of
Securities, shall authenticate and deliver, Securities in definitive form, in an
aggregate principal amount at maturity equal to the principal amount at maturity
of the Global Security representing such Securities, in exchange for such Global
Security. The Company shall reimburse the Registrar, the Depository and the
Trustee for expenses they incur in documenting such exchanges and issuances of
Securities in definitive form.
The Company may at any time and in its sole discretion determine that
the Securities shall no longer be represented by such Global Security or
Securities. In such event the Company will execute, and the Trustee, upon
receipt of a written order for the authentication and delivery of individual
Securities in exchange in whole or in part for such Global Security or
Securities, will authenticate and deliver individual Securities in definitive
form in an aggregate principal amount equal to the principal amount of such
Global Security or Securities in exchange for such Global Security or
Securities.
In any exchange provided for in any of the preceding two paragraphs,
the Company will execute and the Trustee will authenticate and deliver
individual Securities in definitive registered form in authorized denominations.
Upon the exchange of a Global Security for individual Securities, such Global
Security shall be cancelled by the Trustee. Securities issued in exchange for a
Global Security pursuant to this Section 2.06(b) shall be registered in such
names and in such authorized denominations as the Depository for such Global
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such
Securities to the Persons in whose names such Securities are so registered.
None of the Company, the Trustee, any Paying Agent or the Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECTION 2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has
<PAGE>
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been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Security is replaced. The Company may
charge such Holder for its reasonable out-of-pocket expenses in replacing a
Security pursuant to this Section 2.07, including reasonable fees and expenses
of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company, any of the
Guarantors or any of their respective Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser or a protected purchaser. A mutilated Security
---- ----
ceases to be outstanding upon surrender of such Security and replacement thereof
pursuant to Section 2.07. If the principal amount of any Security is considered
paid under Section 4.01, it ceases to be outstanding and interest ceases to
accrue.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or a Subsidiary) holds U.S. Legal Tender sufficient to pay all
of the principal and interest due on the Securities payable on that date, then
on and after that date such Securities cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any of its Subsidiaries or any of their respective Affiliates
shall be
<PAGE>
-45-
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities that a Responsible Officer of the Trustee knows or has reason to know
are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities. Notwithstanding the
foregoing, so long as the Securities are represented by a Global Security, such
Global Security may be in typewritten form.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or a Subsidiary), and no one else, shall
cancel and shall dispose of all Securities surrendered for registration of
transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If the Company or any Guarantor
shall acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Securities, it
shall, unless the Trustee fixes another record date pursuant to Section 6.10,
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest, in any lawful manner. The Company may pay
<PAGE>
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the defaulted interest to the Persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
by the Company for the payment of defaulted interest or the next succeeding
Business Day if such date is not a Business Day. At least 15 days before any
such subsequent special record date, the Company shall mail to each Holder, with
a copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided, however, that any such notice may state
-------- -------
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities, and that reliance may be
placed only on the other identification numbers printed on the Securities.
SECTION 2.14. Restrictive Legends.
-------------------
Each Global Security and Physical Security that constitutes a
Restricted Security or is sold in compliance with Regulation S shall bear the
following legend (the "Private Placement Legend") on the face thereof until
------------------------
after the second anniversary of the later of the Issue Date and the last date on
which the Company or any Affiliate of the Company was the owner of such Security
(or any predecessor security) (or such shorter period of time as permitted by
Rule 144(k) under the Securities Act or any successor provision thereunder) (or
such longer period of time as may be required under the Securities Act or
applicable state securities laws in the opinion of counsel for the Company,
unless otherwise agreed by the Company and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE
<PAGE>
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SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER
THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Security shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO.
<PAGE>
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OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE GOVERNING THIS
SECURITY.
SECTION 2.15. Book-Entry Provisions for Global Security.
-----------------------------------------
(a) Each Global Security initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Section 2.14.
Members of, or participants in, the Depository ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under any
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of each Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in any Global Security may be
transferred or, subject to Section 2.01, exchanged for Physical Securities in
accordance with the rules and procedures of the Depository and the provisions of
Section 2.16. In addition, Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in any Global
Security if
<PAGE>
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(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for the Global Securities and a successor depositary is
not appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a written
request from the Depository or the Trustee to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Security in an amount equal to the principal
amount of the beneficial interest in such Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to paragraph (b), such Global Security shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
such Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c)
of Section 2.16, bear the legend regarding transfer restrictions applicable to
the Physical Securities set forth in Section 2.14.
(f) The Holder of a Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.16. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Security constituting a Restricted
Security to any insti-
<PAGE>
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tutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) (an "Accredited Investor") which is not a QIB or to
-------------------
any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the transferee certifies that it is not an
Affiliate of the Company and the requested transfer is after the second
anniversary of the later of the (a) Issue Date and (b) the last date on
which the Company or an Affiliate of the Company was the owner of such
Security (or any predecessor Security) or such shorter period of time as
permitted by Rule 144(k) under the Securities Act or any successor
provision thereunder or (y) (1) in the case of a transfer to an Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit D hereto or (2) in the case of a transfer to a Non-U.S.
---------
Person, the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit E hereto and such other
---------
information that the Trustee may reasonably request in order to confirm
that such transaction is being made pursuant to an exemption from or in a
transaction not subject to the registration requirements of the Securities
Act; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, the Registrar shall register
the transfer of any Security constituting a Restricted Security, whether or
not such Security bears a Private Placement Legend upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Securities)
a decrease in the principal amount of the applicable Global Security in an
amount equal to the principal amount of the beneficial interest in such Global
Security to be transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Securities of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed
<PAGE>
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transfer of a Security constituting a Restricted Security to a QIB (excluding
transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Securities which after
transfer are to be evidenced by an interest in a Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the applicable Global Security in an amount equal to the principal amount
of the Physical Securities to be transferred, and the Trustee shall cancel
the Physical Securities so transferred.
(c) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a)(i)(x) of this Section 2.16 exists or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order
<PAGE>
-52-
to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such Security acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16 in
accordance with its customary procedures. The Company shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to Paragraph 6 or
Paragraph 7 of the Securities, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of the applicable
Securities to be redeemed. The Company shall give notice of redemption to the
Paying Agent and Trustee at least 30 days but not more than 60 days before the
Redemption Date (unless a shorter notice shall be agreed to by the Trustee in
writing), together with an Officers' Certificate stating that such redemption
will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
--------------------------------------
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed or, if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
--- ----
or by such method as the Trustee shall deem fair and appropriate; provided,
--------
however, that no Securities of a principal amount of $1,000 or less shall be
- -------
redeemed in part;
<PAGE>
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and provided, further, that if a partial redemption is made with the net cash
-------- -------
proceeds of an Equity Offering, selection of the Securities or portions thereof
for redemption shall be made by the Trustee only on a pro rata basis or on as
--- ----
nearly a pro rata basis as is practicable (subject to the procedures of the
--- ----
Depository), unless such method is otherwise prohibited.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at its registered
address. At the Company's request at least 40 days before a Redemption Date
(unless a shorter period shall be acceptable to the Trustee), the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense. Each notice of redemption shall identify the Securities to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities
<PAGE>
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(or portion thereof) to be redeemed, as well as the aggregate principal
amount of Securities to be redeemed and the aggregate principal amount of
Securities to be outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed.
The notice, if mailed in a manner herein provided, shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption in whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Securities called for redemption shall be paid
at the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant Record Dates.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before 11:00 a.m New York time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part only, the
Trustee shall upon written instruction from
<PAGE>
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the Company authenticate for the Holder a new Security or Securities in a
principal amount equal to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal of or
interest on the Securities shall be considered paid on the date it is due if the
Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and
sufficient to pay the installment. Interest on the Securities will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the Trustee at its address c/o
Wilmington Trust FSB, 520 Madison Avenue, 33rd Floor, New York, New York, 10022,
as such office of the Company in accordance with Section 2.03.
<PAGE>
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SECTION 4.03. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (1) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock; (2) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock; (3) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company (other than the Securities) that is subordinate
or junior in right of payment to the Securities; or (4) make any Investment
(other than Permitted Investments) (each of the foregoing actions set forth in
clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"), if
------------------
at the time of such Restricted Payment or immediately after giving effect
thereto:
(1) a Default or an Event of Default shall have occurred and be
continuing; or
(2) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
4.04; or
(3) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market
value of such property as determined reasonably and in good faith by the
Board of Directors of the Company) shall exceed the sum of:
(a) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Company earned subsequent to the Issue Date and on or
prior to the date the Restricted Payment occurs (the "Reference Date")
--------------
(treating such period as a single accounting period); plus
(b) 100% of the aggregate net cash proceeds and the fair market
value, as determined in good faith by the Board of Directors, of
property other than cash
<PAGE>
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received by the Company from any Person (other than a Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date
and on or prior to the Reference Date of Qualified Capital Stock of
the Company other than any Qualified Capital Stock issued in exchange
for the Pacer Preferred Stock; plus
(c) without duplication of any amounts included in clause (3)(b)
above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's
Capital Stock; plus
(d) without duplication, the sum of:
(I) the aggregate amount returned in cash on or with
respect to Investments (other than Permitted Investments) made
subsequent to the Issue Date whether through interest payments,
principal payments, dividends or other distributions or payments;
(II) the net cash proceeds received by the Company or any
Restricted Subsidiary of the Company from the disposition of all
or any portion of such Investments (other than to a Subsidiary of
the Company); and
(III) upon redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the fair market value of such
Subsidiary (valued in each case as provided in the definition of
"Investment");
----------
provided, however, that the sum of clauses (I), (II) and (III) above
-------- --------
shall not exceed the aggregate amount of all such Investments made by
the Company or any Restricted Subsidiary in the relevant Person or
Unrestricted Subsidiary subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
<PAGE>
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(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company,
either (a) solely in exchange for shares of Qualified Capital Stock of the
Company or (b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Securities either (a)
solely in exchange for shares of Qualified Capital Stock of the Company, or
(b) through the application of net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of (I) shares of
Qualified Capital Stock of the Company or (II) Refinancing Indebtedness;
(4) if no Default or Event of Default shall have occurred and be
continuing, repurchases by the Company or any Restricted Subsidiary of the
Company of Capital Stock of the Company or any Restricted Subsidiary of the
Company from (i) employees of the Company or any of its Subsidiaries or
their authorized representatives (a) upon the death, disability or
termination of employment of such employees or consultants or to the extent
required pursuant to employee benefit plans, employment agreements or
consulting agreements, (b) pursuant to any other agreements with such
employees of or consultants to the Company or any of its Subsidiaries, in
an aggregate amount not to exceed $5.0 million in any calendar year (with
unused amounts in any calendar year being carried over to succeeding years
subject to a maximum of $10.0 million in any calendar year) or (c) to the
extent required pursuant to the Shareholder Agreement or the Option Plan or
(ii) Richard P. Hyland;
(5) the declaration and payment of dividends to holders of any
class or series of Preferred Stock (other than Disqualified Capital Stock)
issued after the Issue Date, provided that for the most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date of issuance of such Preferred Stock, after
giving effect to such issuance on a pro forma basis, the Company would have
--- -----
had a Consolidated Fixed Charge Coverage Ratio of at least 1.75 to 1.0;
<PAGE>
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(6) the payment of dividends on the Company's Common Stock,
following the first public offering of the Company's Common Stock after the
Issue Date, of up to 6% per annum of the net proceeds received by the
Company in such public offering, other than public offerings with respect
to the Company's Common Stock registered on Form S-8 (or any successor
form);
(7) the repurchase, retirement or other acquisition or retirement
for value of equity interests of the Company in existence on the Issue Date
and from the Persons holding such equity interests on the Issue Date and
which are not held by Apollo or any of its Affiliates or members of
management of the Company and its Subsidiaries on the Issue Date (including
any equity interests issued in respect of such equity interests as a result
of a stock split, recapitalization, merger, combination, consolidation or
similar transaction), provided, however, that the Company shall be
-------- -------
permitted to make Restricted Payments under this clause only if after
giving effect thereto, the Company would be permitted to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.04;
(8) other Restricted Payments in an aggregate amount not to exceed
$10.0 million;
(9) if no Default or Event of Default shall have occurred and be
continuing, payments or distributions to dissenting stockholders pursuant
to applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of this
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of the Company; and
(10) if no Default or Event of Default shall have occurred and be
continuing, payments of cash in lieu of the issuance of fractional shares
upon the exercise of warrants or upon the conversion or exchange of, or
issuance of Capital Stock in lieu of cash dividends on, any Capital Stock
of the Company or any Restricted Subsidiary, which in the aggregate do not
exceed $3.0 million.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date in accordance with clause (3) of the immediately preceding
paragraph, amounts expended pursuant
<PAGE>
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to clauses (1), (2)(b), (4), (5), (6), (7), (8), (9) and (10) shall be included
in such calculation.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.04. Limitation on Incurrence of Additional Indebtedness.
----------------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
-----
(other than Permitted Indebtedness); provided, however, that if no Default or
-------- -------
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
the Guarantors may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and Restricted Subsidiaries of the Company that are not Guarantors
may incur Acquired Indebtedness, in each case if on the date of the incurrence
of such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.25 to
1.0 if such incurrence is on or prior to June 1, 2000 or 2.5 to 1.0 if such
incurrence is thereafter.
SECTION 4.05. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each such Restricted Subsidiary and the rights
(charter and statutory) and material franchises of the Company and each of its
Restricted Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to preserve any such right, franchise or corporate existence with
respect to each such Restricted Subsidiary if the Board of Directors of the
Company shall determine that the loss thereof is not, and will not be, adverse
in any material respect to the Holders.
<PAGE>
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SECTION 4.06. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of its Subsidiaries or
upon the income, profits or property of it or any of its Restricted Subsidiaries
and (b) all lawful claims for labor, materials and supplies which, in each case,
if unpaid, might by law become a material liability or Lien upon the property of
it or any of its Restricted Subsidiaries; provided, however, that the Company
-------- -------
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, (i) the applicability or
validity is being contested in good faith by appropriate proceedings and for
which appropriate provision has been made or (ii) where the failure to effect
such payment or discharge is not adverse in any material respect to the Holders.
SECTION 4.07. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall cause all material properties owned by or
leased by it or any of its Restricted Subsidiaries used or useful to the conduct
of its business or the business of any of its Restricted Subsidiaries, taken as
a whole, to be maintained and kept in normal condition, repair and working order
and supplied with all necessary equipment and shall cause to be made all
repairs, renewals, replacements, and betterments thereof, all as in its judgment
may be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section 4.07 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or any such Restricted
Subsidiary desirable in the conduct of the business of the Company or any such
Restricted Subsidiary, and if such discontinuance or disposal is not adverse in
any material respect to the Holders; provided, further, that nothing in this
-------- -------
Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries
from discontinuing or disposing of any properties to the extent otherwise
permitted by this Indenture.
(b) The Company shall maintain, and shall cause its Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance
<PAGE>
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provisions, as are, in the Company's reasonable judgment, customarily carried by
similar businesses of similar size, including property and casualty loss,
workers' compensation and interruption of business insurance.
SECTION 4.08. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company and each Guarantor shall deliver to the Trustee,
within 120 days after the close of each fiscal year of the Company (currently
the last Friday in December) an Officers' Certificate stating that a review of
the activities of the Company or the applicable Guarantor has been made under
the supervision of the signing officers with a view to determining whether it
has kept, observed, performed and fulfilled its obligations under this Indenture
and further stating, as to each such Officer signing such certificate, that to
the best of his or her knowledge the Company or the applicable Guarantor during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such year
and at the date of such certificate there is no Default or Event of Default that
has occurred and is continuing or, if such signers do know of such Default or
Event of Default, the certificate shall describe its status with particularity.
The applicable Officers' Certificate shall also notify the Trustee should the
Company or any Guarantor elect to change the manner in which it fixes its fiscal
year end.
(b) The annual financial statements delivered pursuant to Section
4.10 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall deliver to the Trustee, forthwith upon becoming
aware of any Default or Event of Default in the performance of any covenant,
agreement or condition contained in this Indenture, an Officers' Certificate
specifying the Default or Event of Default and describing its status with
particularity.
<PAGE>
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SECTION 4.09. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States, all states and municipalities thereof, and of
any governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as would not in the aggregate have a material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries taken as a whole.
SECTION 4.10. Reports to Holders.
------------------
Whether or not required by the rules and regulations of the
Commission, so long as any Securities are outstanding, the Company shall file a
copy of the following information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and shall
furnish to the Holders of Securities and to securities analysts and prospective
investors, upon their request:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries and, with
respect to the annual information only, a report thereon by the Company's
certified independent accounts; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports,
in each case within five days of the time periods specified in the Commission's
rules and regulations.
In addition, following the consummation of the Exchange Offer, whether
or not required by the rules and regulations of the Commission, the Company
shall file a copy of all such information and reports with the Commission for
public availability within the time periods specified in the Commission's rules
and regulations (unless the Commission will not
<PAGE>
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accept such a filing) and make such information available to securities analysts
and prospective investors upon written request to the Company.
In addition, for so long as any Securities remain outstanding, the
Company shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and each Guarantor covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or such Guarantor from paying all or any portion of the principal of
and/or interest on the Securities or the Guarantee of any such Guarantor as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture, and (to the
extent that it may lawfully do so) each hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.12. Limitations on Transactions with Affiliates.
-------------------------------------------
(1) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
---------
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
- -----------
(2) below and (y) Affiliate Transactions on terms that are no less favorable
than those that might reasonably have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not an Affiliate of
the Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $2.0 million shall be approved by the Board of Directors of the
Company or such Re-
<PAGE>
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stricted Subsidiary, as the case may be, such approval to be evidenced by a
Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a
series of related Affiliate Transactions related to a common plan) that involves
an aggregate fair market value of more than $10.0 million, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(2) The restrictions set forth in clause (1) shall not apply to:
(a) reasonable fees and compensation paid to and indemnity provided
on behalf of, officers, directors, employees or consultants of the Company
or any Restricted Subsidiary of the Company as determined in good faith by
the Company's Board of Directors;
(b) transactions exclusively between or among the Company and any of
its Wholly Owned Restricted Subsidiaries or exclusively between or among
such Wholly Owned Restricted Subsidiaries, provided such transactions are
--------
not otherwise prohibited by this Indenture;
(c) any agreement as in effect as of the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the
Holders in any material respect than the original agreement as in effect on
the Issue Date;
(d) Restricted Payments permitted by this Indenture;
(e) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or
meets the requirements of the first sentence of paragraph (1) above;
<PAGE>
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(f) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the Issue
Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Company
-------- -------
or any of its Restricted Subsidiaries of obligations under, any future
amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause to
the extent that the terms of any such amendment or new agreement are not
otherwise disadvantageous to the Holders of the Securities in any material
respect;
(g) the issuance of securities or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by Board of
Directors of the Company in good faith and loans to employees of the
Company and its Subsidiaries which are approved by the Board of Directors
of the Company in good faith;
(h) the payment of all fees and expenses related to the Transactions;
(i) transactions with customers, clients, suppliers, or purchasers or
sellers of goods or services, in each case in the ordinary course of
business and otherwise in compliance with the terms of this Indenture,
which are fair to the Company or its Restricted Subsidiaries, in the
reasonable determination of the Board of Directors of the Company or the
senior management thereof, or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party; and
(j) fees payable to Apollo pursuant to the Management Agreement and
the Shareholders' Agreement.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Subsidiaries.
------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
<PAGE>
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any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of:
(1) applicable law;
(2) this Indenture;
(3) the Credit Agreement;
(4) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary of the Company;
(5) any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person or the properties or assets of the
Person so acquired;
(6) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature discussed in
clause (c) above on the property so acquired;
(8) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Restricted Subsidiary of the
Company pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary;
(9) secured Indebtedness otherwise permitted to be incurred pursuant
to Sections 4.04 and 4.14 that limit the right of the debtor to dispose of
the assets securing such Indebtedness;
(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
<PAGE>
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(11) customary net worth provisions contained in leases and other
agreements entered into by the Company or any Restricted Subsidiary;
(12) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred
to in clauses (1) through (11) above; provided, however, that the
-------- -------
provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable to the Company in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such
clauses; or
(13) an agreement governing Indebtedness permitted to be incurred
pursuant to Section 4.04; provided that the provisions relating to such
--------
encumbrance or restriction contained in such Indebtedness are no less
favorable to the Company in any material respect as determined by the Board
of Directors of the Company in their reasonable and good faith judgment
than the provisions contained in the Credit Agreement as in effect on the
Issue Date.
SECTION 4.14. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless:
(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Securities, the Securities
are secured by a Lien on such property, assets or proceeds that is senior
in priority to such Liens; and
(2) in all other cases, the Securities are equally and ratably
secured,
except for the following Liens which are expressly permitted:
<PAGE>
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(a) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date;
(b) Liens securing Senior Debt and Liens securing Guarantor Senior
Debt;
(c) Liens securing the Securities and the Guarantees;
(d) Liens of the Company or a Wholly Owned Restricted Subsidiary of
the Company on assets of any Restricted Subsidiary of the Company;
(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness (including, without limitation, Acquired
Indebtedness) which has been secured by a Lien permitted under this
Indenture and which has been incurred in accordance with the provisions of
this Indenture; provided, however, that such Liens:
-------- -------
(I) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the Liens
in respect of the Indebtedness being Refinanced; and
(II) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and
(f) Permitted Liens.
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (the "Change of Control Offer"), and
-----------------------
shall purchase, on a Business Day (the "Change of Control Payment Date") as
------------------------------
described below, all of the then outstanding Securities at a purchase price
equal to 101.0% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the Change of Control Payment Date. The Change of
Control Offer shall remain open for at least 20 Business Days and until the
close of business on the Change of Control Payment Date.
<PAGE>
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(b) Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company covenants to:
(1) repay in full and terminate all commitments under Indebtedness
under the Credit Agreement and all other Senior Debt the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement
and all other such Senior Debt and to repay the Indebtedness owed to each
lender which has accepted such offer; or
(2) obtain the requisite consents under the Credit Agreement and all
other Senior Debt to permit the repurchase of the Securities as provided
below.
The Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Securities pursuant to the
provisions described below. The Company's failure to comply with the covenant
described in the second preceding sentence (and any failure to send the notice
referred to in clause (c) below because same is prohibited by the second
preceding sentence) may (with notice and lapse of time) constitute an Event of
Default described in clause (3) of Section 6.01 but shall not constitute an
Event of Default described in clause (2) of Section 6.01.
(c) Within 30 days following the date upon which a Change of Control
occurs (the "Change of Control Date"), the Company shall send, by first class
----------------------
mail, a notice to each Holder, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Change of Control Offer. Such notice shall
state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest) and
the Change of Control Payment Date, which shall be a Business Day, that is
not earlier than 30 days or later than 60 days from the date such notice is
mailed;
<PAGE>
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(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day prior to
the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all
Securities so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
the Holders of Securities so accepted payment in an amount equal to the purchase
price plus accrued interest, if any, and upon written order of the Company the
Trustee shall promptly authenticate and mail to such Holders new Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered. Any
<PAGE>
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Securities not so accepted shall be promptly mailed by the Company to the Holder
thereof. For purposes of this Section 4.15, the Trustee shall act as the Paying
Agent.
Any amounts remaining with the Paying Agent after the purchase of
Securities pursuant to a Change of Control Offer shall be returned by the
Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
-------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company or the applicable Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of
(as determined in good faith by the Company's Board of Directors);
(2) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of such
disposition; provided that the amount of (a) any liabilities (as shown on
--------
the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than liabilities that are
by their terms subordinated to the Securities) that are assumed by the
transferee of any such assets, and (b) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary
into cash within 180 days after such Asset Sale (to the extent of the cash
received) shall be deemed to be cash for the purposes of this provision
only; and
<PAGE>
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(3) upon the consummation of an Asset Sale, the Company shall apply,
or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof either:
(a) to prepay any Senior Debt or Guarantor Senior Debt and, in
the case of any Senior Debt or Guarantor Senior Debt under any
revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility;
(b) to make an Investment (x) in properties and assets that
replace the properties and assets that were the subject of such Asset
Sale, (y) in properties and assets that will be used in the business
of the Company and its Restricted Subsidiaries as existing on the
Issue Date or in businesses the same, similar or reasonably related
thereto or (z) permitted by clause (1) of the definition of Permitted
Investments (collectively, "Replacement Assets"); or
------------------
(c) a combination of prepayment and investment permitted by the
foregoing clauses (3)(a) and (3)(b).
On the 361st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (3)(a), (3)(b) and (3)(c) of the next preceding paragraph
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
-------------------------------
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the next
preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by the
-------------------------
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
---
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
- -------------- -------------------------------
30 nor more than 60 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis, that amount of Securities equal to
--- ----
the Net Proceeds Offer Amount at a price equal to 100% of the principal amount
of the Securities to be purchased, plus accrued and unpaid interest thereon, if
any, to the date of purchase; provided, however, that if at any time any non-
-------- -------
cash consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any
<PAGE>
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such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder as of the date of such conversion
or disposition and the Net Cash Proceeds thereof shall be applied in accordance
with this covenant.
The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $7.5
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $7.5
million, shall be applied as required pursuant to the preceding paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, which
transaction does not constitute a Change of Control, the successor corporation
shall be deemed to have sold the properties and assets of the Company and its
Restricted Subsidiaries not so transferred for purposes of this covenant, and
shall comply with the provisions of this covenant with respect to such deemed
sale as if it were an Asset Sale. In addition, the fair market value of such
properties and assets of the Company or its Restricted Subsidiaries deemed to be
sold shall be deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the first two paragraphs of this Section 4.16, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent that:
(1) at least 75% of the consideration for such Asset Sale constitutes
Replacement Assets; and
(2) such Asset Sale is for fair market value; provided that any
--------
consideration not constituting Replacement Assets received by the Company
or any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the first two paragraphs of this
Section 4.16.
Notice of each Net Proceeds Offer pursuant to this Section 4.16 shall
be mailed or caused to be mailed, by first class mail, by the Company within 25
days following the applicable Net Proceeds Offer Trigger Date to all Holders at
their
<PAGE>
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last registered addresses, with a copy to the Trustee. A Net Proceeds Offer
shall remain open for a period of 20 Business Days or such longer period as may
be required by law. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Net
Proceeds Offer and shall state the following terms:
(1) that Holders may elect to have their Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Net Proceeds Offer is oversubscribed) in
integral multiples of $1,000 of principal amount, at the applicable
purchase price;
(2) that the Net Proceeds Offer is being made pursuant to this
Section 4.16 and that all Securities tendered will be accepted for payment;
provided, however, that if the principal amount of Securities tendered in
-------- -------
the Net Proceeds Offer exceeds the aggregate amount of the Net Proceeds
Offer Amount, the Company shall select the Securities to be purchased on a
pro rata basis (based on amounts tendered);
--- ----
(3) the purchase price (including the amount of accrued interest, if
any) and the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the Net Proceeds Offer Trigger Date, other than as
may be required by applicable law);
(4) that any Security not tendered will continue to accrue interest;
(5) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Offer Payment Date;
(6) that Holders electing to have a Security purchased pursuant to
the Net Proceeds Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Net Proceeds Offer Payment
Date;
(7) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Net Proceeds Offer Pay-
<PAGE>
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ment Date, a facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Security purchased; and
(8) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount at maturity equal to the
unpurchased portion of the Securities surrendered.
On or before the Net Proceeds Offer Payment Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Net Proceeds Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price, plus accrued interest, if any, of all
Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an amount
equal to the purchase price, plus accrued interest, if any, thereon set forth in
the notice of such Net Proceeds Offer. Any Security not so accepted shall be
promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Net Proceeds Offer shall be returned by the Trustee to the Company. To the
extent that the aggregate amount of the Securities tendered pursuant to a Net
Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use
such excess Net Proceeds Offer Amount for general corporate purposes or for any
other purposes not prohibited by this Indenture. Upon completion of any such
Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.16, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.16 by virtue thereof.
<PAGE>
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SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt.
-----------------------------------------------------
The Company and the Guarantors shall not incur or suffer to exist
Indebtedness that is senior in right of payment to the Securities or the
Guarantees, as the case may be, and subordinate in right of payment by its terms
to any other Indebtedness of the Company or such Guarantor, as the case may be.
SECTION 4.18. Additional Subsidiary Guarantees.
--------------------------------
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Domestic Restricted Subsidiary that is not a
Guarantor, or if the Company or any of its Restricted Subsidiaries shall
organize, acquire or otherwise invest in another Domestic Restricted Subsidiary
having total equity value in excess of $1.0 million, then such transferee or
acquired or other Restricted Subsidiary shall:
(1) execute and deliver to the Trustee a supplemental indenture, in
form reasonably satisfactory to the Trustee, pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the Company's
obligations under the Securities and this Indenture on the terms set forth
in this Indenture;
(2) deliver to the Trustee an Opinion of Counsel that such
supplemental indenture has been duly authorized, executed and delivered by
such Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary; and
(3) execute a Guarantee.
Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of
this Indenture.
<PAGE>
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
----------------------------------------
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless:
(1) either (a) the Company shall be the surviving or continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving
---------
Entity"):
------
(x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia and
(y) shall expressly assume, by supplemental indenture (in form
and substance reasonably satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the
Securities and the performance of every covenant of the Securities and
this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction on a pro
---
forma basis and the assumption contemplated by clause (1)(b)(y) above
-----
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), the Company or such Surviving Entity, as the case may
be, shall be able to incur at least $1.00
<PAGE>
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of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.04;
(3) immediately before and immediately after giving effect to such
transaction on a pro forma basis and the assumption contemplated by clause
--- -----
(1)(b)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred or repaid and any Lien granted or to be released in connection
with or in respect of the transaction), no Default or Event of Default
shall have occurred or be continuing; and
(4) the Company or the Surviving Entity, as the case may be, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
Notwithstanding the foregoing, the merger of the Company with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction shall be permitted, subject to compliance with clauses (1)
and (4) of this Section 5.01.
(b) No Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
shall, and the Company shall not cause or permit any Guarantor to, consolidate
with or merge with or into any Person other than the Company or any other
Guarantor unless:
(1) the entity formed by or surviving any such consolidation or
merger (if other than the Guarantor) or to which such sale, lease,
conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia;
(2) such entity assumes by supplemental indenture all of the
Obligations of the Guarantor under the Guarantee;
<PAGE>
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(3) immediately after giving effect to such transaction on a pro
---
forma basis, no Default or Event of Default shall have occurred and be
-----
continuing;
(4) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Company could
--- -----
satisfy the provisions of clause (2) of Section 5.01(a); and
(5) the Company or the Surviving Entity, as the case may be, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
Any merger or consolidation of a Guarantor with and into the Company (with the
Company being the Surviving Entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company need only comply with clause (4) of Section
5.01(a).
(c) For purposes of the foregoing paragraph (a), the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02. Successor Corporation Substituted.
---------------------------------
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01 in which the Company or any Guarantor, as applicable, is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company or such Guarantor is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor under this Indenture and
the Securities or the Guarantee, as applicable, with the same effect as if such
Surviving Entity had been named as such.
<PAGE>
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
Each of the following shall be an "Event of Default":
----------------
(1) the failure to pay interest on any Securities when the same
becomes due and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by Article Ten or Twelve
of this Indenture);
(2) the failure to pay the principal on any Securities, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Securities
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article Ten or Twelve
of this Indenture);
(3) a default in the observance or performance of any other
covenant or agreement contained in this Indenture, which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or from the Holders of at least 25% of the outstanding
principal amount of the Securities;
(4) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final stated maturity or which has
been accelerated, aggregates $10.0 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
<PAGE>
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(6) the Company or any of its Significant Subsidiaries (i) commences
a voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (ii) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case or proceeding under any Bankruptcy
Law, (iii) consents to the appointment of a custodian of it or for
substantially all of its property, (iv) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (v)
makes a general assignment for the benefit of its creditors or (vi) takes
any corporate action to authorize or effect any of the foregoing;
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law,
which shall (i) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Significant Subsidiaries, (ii) appoint a Custodian of
the Company or any of its Significant Subsidiaries or for substantially all
of any of its property or (iii) order the winding-up or liquidation of its
affairs; and such judgment, decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(8) any of the Guarantees of a Significant Subsidiary ceases to be
in full force and effect or any of the Guarantees of a Significant
Subsidiary is declared to be null and void and unenforceable or any of the
Guarantees of a Significant Subsidiary is found to be invalid or any
Guarantor that is a Significant Subsidiary denies its liability under its
Guarantee (other than by reason of release of such Guarantor in accordance
with the terms of this Indenture).
If, pursuant to clause (3) above, the Holders of at least 25% of the
then outstanding principal amount of Securities notify the Company as specified
in such clause, such Holders shall similarly notify the Trustee. Any notice
given pursuant to clause (3) above or the immediately preceding sentence shall
be given by registered or certified mail, return receipt requested.
<PAGE>
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SECTION 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
clause (6) or (7) of Section 6.01 above with respect to the Company) shall occur
and be continuing, the Trustee or the Holders of at least 25% in principal
amount of outstanding Securities may declare the principal of and accrued
interest on all the Securities to be due and payable by notice in writing to the
Company (and the Trustee if given by the Holders) specifying the respective
Event of Default and that it is a "notice of acceleration" (the "Acceleration
------------
Notice"), and the same (i) shall become immediately due and payable or (ii) if
- ------
there are any amounts outstanding under the Credit Agreement, shall become
immediately due and payable upon the first to occur of an acceleration under the
Credit Agreement or five (5) Business Days after receipt by the Company and the
Representative under the Credit Agreement of such Acceleration Notice but only
if such Event of Default is then continuing. If an Event of Default specified
in clause (6) or (7) of Section 6.01 above with respect to the Company occurs
and is continuing, then all unpaid principal of, and premium, if any, and
accrued and unpaid interest on all of the outstanding Securities shall ipso
----
facto become and be immediately due and payable without any declaration or other
- -----
act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority in
principal amount of the Securities may rescind and cancel such declaration and
its consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances, and any
other amounts due to the Trustee under Section 7.07 and (v) in the event of the
cure or waiver of an Event of Default of the type described in clause (6) or (7)
of Section 6.01, the Trustee shall have received an Officers' Certificate and an
Opinion of Counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or Event of Default or impair any
right consequent thereto.
<PAGE>
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SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less than
a majority in principal amount of the outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences,
except a Default or Event of Default in the payment of principal of or interest
on any Security as specified in clauses (1) and (2) of Section 6.01. The
Company shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
-------------------
The Holders of not less than a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. Subject to Section 7.01, however, the Trustee may refuse
to follow any direction that conflicts with any law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
--------
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole dis-
<PAGE>
-85-
cretion against any loss or expense caused by taking such action or following
such direction.
SECTION 6.06. Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holder or Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 45 days
after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(5) during such 45-day period the Holder or Holders of a majority
in principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or
<PAGE>
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any other obligor on the Securities for the whole amount of principal and
accrued interest and fees remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
--- -----
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due to the Trustee under Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due to the Trustee under Section 7.07) and the Securityholders allowed
in any judicial proceedings relating to the Company, its creditors or its
property and shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Securityholder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Securityholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
<PAGE>
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Second: subject to Articles Ten and Twelve, to Holders for interest
accrued on the Securities, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
interest;
Third: subject to Articles Ten and Twelve, to Holders for principal
amounts due and unpaid on the Securities, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal; and
Fourth: to the Company or, if applicable, the Guarantors, as their
respective interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
<PAGE>
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(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth herein or in the TIA and no duties, covenants, responsibilities
or obligations shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates (including Officers'
Certificates) or opinions (including Opinions of Counsel) furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein, the Trustee may
not be relieved from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to this Section 7.01.
<PAGE>
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) In the absence of bad faith, negligence or willful misconduct on
the part of the Trustee, the Trustee shall not be responsible for the
application of any money by any Paying Agent other than the Trustee.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel, which shall conform to
the provisions of Section 13.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, un-
<PAGE>
-90-
less such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate (including any
Officers' Certificate), statement, instrument, opinion (including any
Opinion of Counsel), notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney.
(h) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(i) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as duties.
(j) The Trustee shall not be charged with knowledge of any Default or
Event of Default, of the identity of any Restricted Subsidiary or the existence
of any Change of Control or Asset Sale unless either (i) a Responsible Officer
shall have actual knowledge thereof or (ii) the Trustee shall have received
written notice thereof from the Company or any Holder.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries (including the Guarantors), or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Guarantees or the
Securities, it shall not be ac-
<PAGE>
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countable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication. The
Trustee makes no representations with respect to the effectiveness or adequacy
of this Indenture.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such Default or Event of Default, the Trustee
shall mail to each Securityholder notice of the uncured Default or Event of
Default within 60 days after such Default or Event of Default occurs. Except in
the case of a Default or an Event of Default in payment of principal of, or
interest on, any Security, including an accelerated payment and the failure to
make payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or the Net Proceeds Offer Payment Date pursuant to a Net Proceeds
Offer, the Trustee may withhold the notice if and so long as the Board of
Directors, the executive committee, or a trust committee of directors and/or
Responsible Officers, of the Trustee in good faith determines that withholding
the notice is in the interest of the Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, beginning with the first May 15
following the date of this Indenture, the Trustee shall, to the extent that any
of the events described in TIA (S) 313(a) occurred within the previous twelve
months, but not otherwise, mail to each Securityholder a brief report dated as
of such date that complies with TIA (S) 313(a). The Trustee also shall comply
with TIA (S)(S) 313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the Commission and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof and the Trustee shall
comply with TIA (S) 313(d).
<PAGE>
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SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances (including reasonable fees and expenses of counsel)
incurred or made by it in addition to the compensation for its services, except
any such disbursements, expenses and advances as may be attributable to the
Trustee's negligence, bad faith or willful misconduct. Such expenses shall
include the reasonable fees and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers, stockholders and directors for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the acceptance or administration of this
trust including the reasonable costs and expenses of defending themselves
against or investigating any claim or liability in connection with the exercise
or performance of any of the Trustee's rights, powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee or any of its agents, employees, officers, stockholders and directors
for which it may seek indemnity. The Company may, subject to the approval of the
Trustee, defend the claim and the Trustee shall cooperate in the defense. The
Trustee and its agents, employees, officers, stockholders and directors subject
to the claim may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel; provided, however, that the Company will not
-------- -------
be required to pay such fees and expenses if, subject to the approval of the
Trustee, it assumes the Trustee's defense and there is no conflict of interest
between the Company and the Trustee and its agents, employees, officers,
stockholders and directors subject to the claim in connection with such defense
as reasonably determined by the Trustee. The Company need not pay for any
settlement made without its written consent. The Company need not reimburse any
expense or indemnify against any loss or liability to the extent incurred by the
Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to
<PAGE>
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the Securities against all money or property held or collected by the Trustee,
in its capacity as Trustee. The obligations of the Company and the Guarantors
under this Section shall not be subordinated to the payment of Senior Debt
pursuant to Article Ten or Article Twelve except assets or money held in trust
to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (6) or (7) of Section 6.01 occurs, such expenses and
the compensation for such services shall be paid to the extent allowed under any
Bankruptcy Law.
Notwithstanding any other provision in this Indenture, the foregoing
provisions of this Section 7.07 shall survive the satisfaction and discharge of
this Indenture or the appointment of a successor Trustee.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee
and may appoint a successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to
<PAGE>
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the successor Trustee, subject to the Lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession to
each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
--------
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. In addition, if the Trustee
is a corporation included in a bank holding company system, the Trustee,
independently of the bank holding company, shall meet the capital requirements
of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S) 310(b); provided,
--------
however, that there shall be excluded from the operation of TIA (S) 310(b)(1)
- -------
any indenture or indentures under which other securities, or certificates of
interest or participation in other securities,
<PAGE>
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of the Company are outstanding, if the requirements for such exclusion set forth
in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the
Company and any other obligor of the Securities.
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee, in its capacity as Trustee hereunder, shall comply with
TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A
Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to
the extent indicated.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations.
----------------------------------------
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment U.S. Legal Tender has
theretofore been deposited with the Trustee or the Paying Agent in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Securities in accordance with the
provisions hereof or (ii) all Securities have otherwise become due and
payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders of that purpose, U.S. Legal Tender in
<PAGE>
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such amount as is sufficient without consideration of reinvestment of such
interest, to pay principal of, premium, if any, and interest on the
outstanding Securities to maturity or redemption; provided that the Trustee
--------
shall have been irrevocably instructed to apply such U.S. Legal Tender to
the payment of said principal, premium, if any, and interest with respect
to the Securities and provided, further, that from and after the time of
-------- -------
deposit, the money deposited shall not be subject to the rights of holders
of Senior Debt or Guarantor Senior Debt pursuant to the provisions of
Article Ten or Twelve, as the case may be;
(c) no Default or Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument or agreement (including, without limitation, the Credit
Agreement) to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for or relating to the termination of the Company's
obligations under the Securities and this Indenture have been complied
with. Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under the Credit Agreement or any
other material agreement or instrument then known to such counsel that
binds or affects the Company.
Subject to the next sentence and notwithstanding the foregoing
paragraph, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01,
4.02, 7.07, 8.05 and 8.06 shall survive until the Securities are no longer
outstanding pursuant to the last paragraph of Section 2.08. After the
Securities are no longer outstanding, the Company's obligations in Sections
7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations
specified above.
<PAGE>
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SECTION 8.02. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below applied to all outstanding Securities upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company and each of the Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.03,
be deemed to have been discharged from their respective obligations with respect
to all outstanding Securities and the corresponding Guarantees on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
----------------
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Securities and any amounts deposited
under Section 8.03 hereof shall cease to be subject to any obligations to, or
the rights of, any holder of Senior Debt under Article Ten or otherwise, except
for the following provisions, which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Securities to
receive solely from the trust fund described in Section 8.04 hereof, and as more
fully set forth in such Section, payments in respect of the principal of and
interest on such Securities when such payments are due, (ii) the Company's
obligations with respect to such Securities under Article Two and Section 4.02
hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (iv) this
Article Eight. Subject to compliance with this Article Eight, the Company may
exercise its option under this paragraph (b) notwithstanding the prior exercise
of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company and each of the Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.03
hereof, be released from their obligations, if any, under the covenants
con-
<PAGE>
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tained in Sections 4.03, 4.04 and Sections 4.12 through 4.18 and Article Five
hereof with respect to the outstanding Securities and the corresponding
Guarantees on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Securities shall thereafter be
--------------------
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Securities shall
not be deemed outstanding for accounting purposes) and Holders of the Securities
and any amounts deposited under Section 8.03 hereof shall cease to be subject to
any obligations to, or the rights of, any holder of Senior Debt under Article
Ten or otherwise. For this purpose, such Covenant Defeasance means that, with
respect to the outstanding Securities, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01(c) hereof, but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby. In addition,
upon the Company's exercise under paragraph (a) hereof of the option applicable
to this paragraph (c), subject to the satisfaction of the conditions set forth
in Section 8.03 hereof, Sections 6.01(3), 6.01(4) and 6.01(5) shall not
constitute Events of Default.
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.
-----------------------------------------------------
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or non-callable U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms, will provide,
not later than one day before the due date of any payment on the
Securities, U.S. Legal Tender, or a
<PAGE>
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combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the Securities on the
stated date for payment thereof or on the applicable redemption date, as
the case may be;
(b) in the case of an election under Section 8.02(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the execution of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Securities pursuant to
this Article Eight concurrently with such incurrence) or insofar as
Sections 6.01(6) and 6.01(7) hereof are concerned, at any time in the
period ending on the 91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture, the
Credit Agreement or any other material agreement or instrument to which the
<PAGE>
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Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent hereunder provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to any
rights of any holders of Senior Debt, including, without limitation, those
arising under this Indenture, and (ii) assuming no intervening bankruptcy
or insolvency of the Company between the date of deposit and the 91st day
following the deposit and that no Holder is an insider of the Company,
after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law.
Notwithstanding the foregoing, the Opinion of Counsel required by
clause (b) above of this Section 8.03 need not be delivered if all Securities
not theretofore delivered to the Trustee for cancellation (i) have become due
and payable, (ii) will become due and payable on the Maturity Date within one
year or (iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
SECTION 8.04. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to this Article Eight,
and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
principal of and interest on the Securities.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed
<PAGE>
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against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant
to Section 8.03 hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account of
the Holders of the outstanding Securities.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U.S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. Repayment to the Company.
------------------------
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years; provided that the Trustee or such Paying Agent, before
--------
being required to make any payment, may at the expense of the Company cause to
be published once in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein which shall be at least 30
days from the date of such publication or mailing any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.
SECTION 8.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with this Article Eight by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with this Article Eight; provided that if the Company has made any
--------
payment of interest on or principal of any Securities
<PAGE>
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because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
Subject to Section 9.03, the Company, the Guarantors and the Trustee,
together, may amend or supplement this Indenture, the Securities or the
Guarantees without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency, so long as such
change does not, in the opinion of the Trustee, adversely affect the rights
of any of the Holders in any material respect. In formulating its opinion
on such matters, the Trustee will be entitled to rely on such evidence as
it deems appropriate, including, without limitation, solely an Opinion of
Counsel;
(2) to evidence the succession in accordance with Article Five hereof
of another Person to the Company and the assumption by any such successor
of the covenants of the Company herein and in the Securities;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any other change that does not adversely affect the rights
of any Securityholders hereunder in any material respect;
(5) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(6) to add or release any Guarantor pursuant to the terms of this
Indenture; or
(7) to provide for issuance of the Exchange Notes, which will have
terms substantially identical in all mate-
<PAGE>
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rial respects to the Initial Notes (except that the transfer restrictions
contained in the Initial Notes will be modified or eliminated, as
appropriate), and which will be treated together with any outstanding
Initial Notes, as a single issue of securities, provided that for purposes
of this clause (7), the terms Initial Notes and Exchange Notes, shall
include any other Securities issued in accordance with clause (iii) of the
fourth paragraph of Section 2.02 or Securities issued in exchange therefor
which are identical in all material respects to such Securities (except
that the transfer restrictions on the Securities issued in exchange for
Securities issued in accordance with clause (iii) of the fourth paragraph
of Section 2.02 shall be modified or eliminated, as appropriate);
provided that the Company has delivered to the Trustee an Opinion of Counsel and
- --------
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Sections 6.07 and 9.03, the Company, the Guarantors and the
Trustee, together, with the written consent of the Holder or Holders of at least
a majority in aggregate principal amount of the outstanding Securities, may
amend or supplement this Indenture, the Securities or the Guarantees, without
notice to any other Securityholders. Subject to Sections 6.07 and 9.03, the
Holder or Holders of a majority in aggregate principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture, the Securities or the Guarantees without notice to any other
Securityholder. Without the consent of each Securityholder affected, however,
no amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including default interest, on any Security;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Security, or change the date on which
any Securities may be subject to redemption or repurchase, or reduce the
redemption or purchase price therefor;
<PAGE>
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(4) make any Securities payable in money other than that stated in the
Securities;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Security on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of
the Securities to waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this Section 9.02;
(7) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Securities or any
Guarantee, in a manner which adversely affects the Holders;
(8) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event
of a Change of Control that has already occurred or make and consummate a
Net Proceeds Offer with respect to any Asset Sale that has been consummated
or modify any of the provisions or definitions with respect thereto after a
Change of Control has occurred or the subject Asset Sale has been
consummated; or
(9) release any Guarantor that is a Significant Subsidiary from any of
its obligations under its Guarantee or this Indenture otherwise than in
accordance with the terms of this Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
<PAGE>
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SECTION 9.03. Effect on Senior Debt.
---------------------
No amendment of, or supplement or waiver to, this Indenture shall
adversely affect the rights of any holder of Senior Debt or Guarantor Senior
Debt under Article Ten or Article Twelve, as the case may be, of this Indenture,
without the consent of such holder.
SECTION 9.04. Compliance with TIA.
-------------------
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture, the Securities or the
Guarantees shall comply with the TIA as then in effect.
SECTION 9.05. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (9) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Secu-
<PAGE>
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rity; provided that any such waiver shall not impair or affect the right of any
--------
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates without
the consent of such Holder.
SECTION 9.06. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Company may require the Holder of the Security to deliver it to the Trustee.
The Company shall provide the Trustee with an appropriate notation on the
Security about the changed terms and cause the Trustee to return it to the
Holder at the Company's expense. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.07. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
--------
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each complying with Sections 13.04 and 13.05 and stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture and constitutes the legal, valid and
binding obligations of the Company enforceable in accordance with its terms.
Such Opinion of Counsel shall be at the expense of the Company.
<PAGE>
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ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinated to Senior Debt.
--------------------------------------
Anything herein to the contrary notwithstanding, the Company, for
itself and its successors, and each Holder, by his or her acceptance of
Securities, agrees that the payment of all Obligations owing to the Holders in
respect of the Securities is subordinated, to the extent and in the manner
provided in this Article Ten, to the prior payment in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, of all Obligations on Senior Debt (including the
Obligations with respect to the Credit Agreement).
This Article Ten shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Senior Debt, and such provisions are
made for the benefit of the holders of Senior Debt and such holders are made
obligees hereunder and any one or more of them may enforce such provisions.
SECTION 10.02. Suspension of Payment When Senior Debt Is in Default.
----------------------------------------------------
(a) Unless Section 10.03 shall be applicable, if any default occurs
and is continuing in the payment when due, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of, interest on,
unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Debt (a "Payment Default"), then no
---------------
payment or distribution of any kind or character shall be made by or on behalf
of the Company or any other Person on its or their behalf with respect to any
Obligations on the Securities or to acquire any of the Securities for cash or
property or otherwise and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Senior Debt as to which such
Payment Default relates shall have been paid in full in cash or Cash
Equivalents, after which the Company shall (subject to other provisions of this
Article Ten) resume making any and all required payments in respect of the
Securities, including any missed payments.
(b) Unless Section 10.03 shall be applicable, if any other event of
default (other than a Payment Default) occurs
<PAGE>
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and is continuing with respect to any Designated Senior Debt (as such event of
default is defined in the instrument creating or evidencing such Designated
Senior Debt) permitting the holders of such Designated Senior Debt then
outstanding to accelerate the maturity thereof (a "Non-payment Default") and if
-------------------
the Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
--------------
then, unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice thereof from the Representative
for the respective issue of Designated Senior Debt terminating the Payment
Blockage Period (as defined below), during the 180 days after the delivery of
such Default Notice (the "Payment Blockage Period"), neither the Company nor any
------------------------
other Person on its behalf shall (x) make any payment of any kind or character
with respect to any Obligations on or with the respect to the Securities or (y)
acquire any of the Securities for cash or property or otherwise. Notwithstanding
anything herein to the contrary, (x) in no event will a Payment Blockage Period
extend beyond 180 days from the date the applicable Default Notice is received
by the Trustee and (y) only one such Payment Blockage Period may be commenced
within any 360 consecutive days. For all purposes of this Section 10.02(b), no
event of default which existed or was continuing on the date of the commencement
of any Payment Blockage Period with respect to the Designated Senior Debt shall
be, or be made, the basis for the commencement of a second Payment Blockage
Period by the Representative of such Designated Senior Debt whether or not
within a period of 360 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such Payment
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by the foregoing provisions of this Section 10.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt (pro rata to such holders on the basis of the respective amount of
--- ----
Senior Debt held by such holders) or their respective Representatives, as their
respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Senior Debt, if
<PAGE>
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any, received from the holders of Senior Debt (or their Representatives) or, if
such information is not received from such holders or their Representatives,
from the Company and only amounts included in the information provided to the
Trustee shall be paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Senior Debt thereafter due or declared to
--------
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Securities.
SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on
--------------------------------------------------------------
Dissolution, Liquidation or Reorganization of Company.
-----------------------------------------------------
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt shall first be paid in full in cash or
Cash Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Securities, or for the
acquisition of any of the Securities for cash or property or otherwise. Upon
any such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the Holders
of the Securities or the Trustee under this Indenture would be entitled, except
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders or by the Trustee under this
Indenture if received by them, directly to the holders of Senior Debt (pro rata
--------
to such holders on the basis of the respective amounts of Senior Debt held by
such holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as
<PAGE>
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their respective interests may appear, for application to the payment of Senior
Debt remaining unpaid until all such Senior Debt has been paid in full in cash
or Cash Equivalents after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf
of the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by this Section 10.03, such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (pro rata to such holders on the basis of the
--------
respective amount of Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
<PAGE>
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SECTION 10.04. Payments May Be Paid Prior to Dissolution.
-----------------------------------------
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Securities, or from depositing with
the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
10.02 or 10.03, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of, and interest on, the
Securities to the Holders entitled thereto unless at least two Business Days
prior to the date upon which such payment would otherwise become due and payable
a Responsible Officer shall have actually received the written notice provided
for in the first sentence of Section 10.02(b) or in Section 10.07 (provided
--------
that, notwithstanding the foregoing, the Holders receiving any payments made in
contravention of Section 10.02 and/or 10.03 (and the respective such payments)
shall otherwise be subject to the provisions of Section 10.02 and Section
10.03). The Company shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of the Company, although
any delay or failure to give any such notice shall have no effect on the
subordination provisions contained herein.
SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt.
------------------------------------------------------------
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Securities shall be subrogated to the rights of
the holders of Senior Debt to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Debt until the
Securities shall be paid in full; and, for the purposes of such subrogation, no
such payments or distributions to the holders of the Senior Debt by or on behalf
of the Company, or by or on behalf of the Holders by virtue of this Article Ten,
which otherwise would have been made to the Holders shall, as between the
Company and the Holders, be deemed to be a payment by the Company to or on
account of the Senior Debt, it being understood that the provisions of this
Article Ten are and are intended solely for the purpose of defining the relative
rights of the Holders, on the one hand, and the holders of Senior Debt, on the
other hand.
<PAGE>
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SECTION 10.06. Obligations of the Company Unconditional.
----------------------------------------
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Debt, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and any interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Holder of any Security or the Trustee on its behalf from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities pursuant to the provisions of this
Article Ten, although any delay or failure to give any such notice shall have no
effect on the subordination provisions contained herein. Regardless of anything
to the contrary contained in this Article Ten or elsewhere in this Indenture,
the Trustee shall not be charged with knowledge of the existence of any default
or event of default with respect to any Senior Debt or of any other facts which
would prohibit the making of any payment to or by the Trustee unless and until
the Trustee shall have received notice in writing from the Company, or from a
holder of Senior Debt or a Representative therefor, and, prior to the receipt of
any such written notice, the Trustee shall be entitled to assume (in the absence
of actual knowledge to the contrary) that no such facts exist. The Trustee
shall be entitled to rely on the delivery to it of any notice pursuant to this
Section 10.07 to establish that such notice has been given by a holder of Senior
Debt (or a Representative therefor).
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is
<PAGE>
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entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Ten, and if such
evidence is not furnished the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Securities shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any
insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation,
reorganization or similar case or proceeding is pending, or upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the
benefit of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or the Holders of the Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
---------------------------------
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may
<PAGE>
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be made and the notice may be given to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the
-------------------------------------------------------------
Company or Holders of Senior Debt.
---------------------------------
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Securities and without impairing or releasing the
subordination provided in this Article Ten or the obligations hereunder of the
Holders of the Securities to the holders of the Senior Debt, do any one or more
of the following: (i) change the manner, place or terms of payment or extend
the time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt, or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of
----------------------------------------------------------------
Securities.
----------
Each Holder of Securities by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Securities, the subordination provided in this Article Ten,
and appoints the Trustee its attorney-in-fact for such purposes, including, in
the event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
other-
<PAGE>
-115-
wise) tending towards liquidation of the business and/or assets of the Company,
the filing of a claim for the unpaid balance of its Securities and accrued
interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Debt or their Representative to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To Prevent Events of Default.
-------------------------------------------------
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
-------------------------------------
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections of this Indenture.
ARTICLE ELEVEN
GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee.
-----------------------
Subject to the provisions of this Article Eleven, each of the
Guarantors hereby, jointly and severally, unconditionally and irrevocably
guarantees, on a senior subordinated basis (such guarantees to be referred to
herein as a "Guarantee") to each Holder of a Security authenticated and
---------
de-
<PAGE>
-116-
livered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company or any other Guarantors to the
Holders or the Trustee hereunder or thereunder, that: (a) the principal of,
premium, if any, and interest on the Securities shall be duly and punctually
paid in full when due, whether at maturity, upon redemption at the option of
Holders pursuant to the provisions of the Securities relating thereto, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Securities and all other
obligations of the Company or the Guarantors to the Holders or the Trustee
hereunder or thereunder (including amounts due the Trustee under Section 7.07
hereof) and all other obligations shall be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed, or failing performance of any other obligation of the Company to the
Holders under this Indenture or under the Securities, for whatever reason, each
Guarantor shall be obligated to pay, or to perform or cause the performance of,
the same immediately. An Event of Default under this Indenture or the
Securities shall constitute an event of default under the Guarantees, and shall
entitle the Holders of Securities to accelerate the obligations of the
Guarantors hereunder in the same manner and to the same extent as the
obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, any release of any other Guarantor,
the recovery of any judgment against the Company, any action to enforce the
same, whether or not a Guarantee is affixed to any particular Security, or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each of the Guarantors hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Guarantee shall not be discharged except by
complete performance of the obligations con-
<PAGE>
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tained in the Securities, this Indenture and the Guarantees. Each Guarantee is a
guarantee of payment and not of collection. If any Holder or the Trustee is
required by any court or otherwise to return to the Company or to any Guarantor,
or any custodian, trustee, liquidator or other similar official acting in
relation to the Company or such Guarantor, any amount paid by the Company or
such Guarantor to the Trustee or such Holder, each Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between it, on the one hand, and the Holders
of Securities and the Trustee, on the other hand, (a) subject to this Article
Eleven, the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Six hereof for the purposes of the Guarantees,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Article Six hereof,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of the Guarantees.
No stockholder, officer, director or employee, past, present or
future, of any Guarantor, as such, shall have any personal liability under such
Guarantor's Guarantee by reason of his, her or its status as such stockholder,
officer, director or employee.
SECTION 11.02. Limitations on Guarantees.
-------------------------
The obligations of each Guarantor under its Guarantee are limited to
the maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Indenture, will result in the obligations of
such Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in an amount pro rata, based on the net assets of each
--- ----
Guarantor, determined in accordance with GAAP.
SECTION 11.03. Execution and Delivery of Guarantee.
-----------------------------------
To further evidence the Guarantees set forth in Section 11.01, each
Guarantor hereby agrees that a notation of its
<PAGE>
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Guarantee, substantially in the form of Exhibit C hereto, shall be endorsed on
---------
each Security authenticated and delivered by the Trustee. The Guarantee of any
Guarantor shall be executed on behalf of such Guarantor by either manual or
facsimile signature of two Officers of such Guarantor, each of whom, in each
case, shall have been duly authorized to so execute by all requisite corporate
action. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Security.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Security on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Security shall nevertheless be valid.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Guarantor.
SECTION 11.04. Release of a Guarantor.
----------------------
(a) If no Default or Event of Default exists or would exist under
this Indenture, upon the sale or disposition of all of the Capital Stock of a
Guarantor by the Company, in a transaction or series of related transactions
that either (i) does not constitute an Asset Sale or (ii) constitutes an Asset
Sale the Net Cash Proceeds of which are applied in accordance with Section 4.16,
or upon the consolidation or merger of a Guarantor with or into any Person in
compliance with Article Five (in each case, other than to the Company or an
Affiliate of the Company), or if any Guarantor is dissolved or liquidated in
accordance with this Indenture, such Guarantor's Guarantee will be automatically
discharged and such Guarantor shall be released from all obligations under this
Article Eleven without any further action required on the part of the Trustee or
any Holder. Any Guarantor not so released or the entity surviving such
Guarantor, as applicable, shall remain or be liable under its Guarantee as
provided in this Article Eleven.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a
<PAGE>
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request by the Company or such Guarantor accompanied by an Officers' Certificate
and an Opinion of Counsel certifying as to the compliance with this Section
11.04; provided, however, that the legal counsel delivering such Opinion of
Counsel may rely as to matters of fact on one or more Officers' Certificates of
the Company.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Securities and under this
Article Eleven.
Except as set forth in Articles Four and Five and this Section 11.04,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
SECTION 11.05. Waiver of Subrogation.
---------------------
Until this Indenture is discharged and all of the Securities are
discharged and paid in full, each Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Securities or this Indenture
and such Guarantor's obligations under its Guarantee and this Indenture, in any
such instance, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Holders against the Company, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Company, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and any amounts owing to the Trustee or the Holders of
Securities under the Securities, this Indenture, or any other document or
instrument delivered under or in connection with such agreements or instruments,
shall not have been paid in full, such amount shall have been deemed to have
been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Trustee or the Holders and shall forthwith be paid to the
Trustee
<PAGE>
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for the benefit of itself or such Holders to be credited and applied to
the obligations in favor of the Trustee or the Holders, as the case may be,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 11.05 is knowingly made in contemplation of
such benefits.
SECTION 11.06. Immediate Payment.
-----------------
Each Guarantor agrees to make immediate payment to the Trustee, on
behalf of the Holders or itself, of all Obligations due and owing or payable to
the respective Holders or the Trustee upon receipt of a demand for payment
therefor by the Trustee to such Guarantor in writing.
SECTION 11.07. No Set-Off.
----------
Each payment to be made by a Guarantor hereunder in respect of the
Obligations shall be payable in the currency or currencies in which such
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.
SECTION 11.08. Obligations Absolute.
--------------------
The obligations of each Guarantor hereunder are and shall be absolute
and unconditional and any monies or amounts expressed to be owing or payable by
each Guarantor hereunder which may not be recoverable from such Guarantor on the
basis of a Guarantee shall be recoverable from such Guarantor as a primary
obligor and principal debtor in respect thereof.
SECTION 11.09. Obligations Continuing.
----------------------
The obligations of each Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the obligations have been paid
and satisfied in full. Each Guarantor agrees with the Trustee that it will from
time to time deliver to the Trustee suitable acknowledgments of its continued
liability hereunder and under any other instrument or instruments in such form
as counsel to the Trustee may advise and as will prevent any action brought
against it in respect of any default hereunder being barred by any statute of
limitations now or hereafter in force and, in the event of the failure of a
Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and
agent of such Guarantor to make, exe-
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cute and deliver such written acknowledgment or acknowledgments or other
instruments as may from time to time become necessary or advisable, in the
judgment of the Trustee on the advice of counsel, to fully maintain and keep in
force the liability of such Guarantor hereunder and under its Guarantee.
SECTION 11.10. Obligations Not Reduced.
-----------------------
The obligations of each Guarantor hereunder shall not be satisfied,
reduced or discharged solely by the payment of such principal, premium, if any,
interest, fees and other monies or amounts as may at any time prior to discharge
of this Indenture pursuant to Article Eight be or become owing or payable under
or by virtue of or otherwise in connection with the Securities or this
Indenture.
SECTION 11.11. Obligations Reinstated.
----------------------
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of any Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Company or by
or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders
upon the insolvency, bankruptcy, liquidation or reorganization of the Company or
any Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
SECTION 11.12. Obligations Not Affected.
------------------------
The obligations of each Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by any Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against any Guarantor hereunder or might operate to release
or otherwise exonerate any Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders or otherwise, including, without limitation:
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(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other Person, including
any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, winding-up or other proceeding involving or
affecting the Company or any other Person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obligation of the Company or any other
Person under this Indenture, the Securities or any other document or
instrument;
(c) any failure of the Company, whether or not without fault on its
part, to perform or comply with any of the provisions of this Indenture or
the Securities, or to give notice thereof to a Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Company or any other Person or their respective assets or the release or
discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Securities, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from, any
of the Securities or this Indenture, including, without limitation, any
increase or decrease in the principal amount of or premium, if any, or
interest on any of the Securities;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Company or a Guarantor;
(h) any merger or amalgamation of the Company or a Guarantor with any
Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect,
<PAGE>
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any of the Obligations or the obligations of a Guarantor under its
Guarantee; and
(j) any other circumstance, including release of a Guarantor pursuant
to Section 11.04 (other than by complete, irrevocable payment) that might
otherwise constitute a legal or equitable discharge or defense of the
Company under this Indenture or the Securities or of another Guarantor in
respect of its Guarantee hereunder;
provided, that the provisions of this Section 11.12 are not intended to affect
- --------
in any way any release of a Guarantor in accordance with the provisions of
Section 11.04.
SECTION 11.13. Waiver.
------
Without in any way limiting the provisions of Section 11.01 hereof,
each Guarantor hereby waives notice of acceptance hereof, notice of any
liability of any Guarantor hereunder, notice or proof of reliance by the Holders
upon the obligations of any Guarantor hereunder, and diligence, presentment,
demand for payment on the Company, protest, notice of dishonor or non-payment of
any of the Obligations, or other notice or formalities to the Company or any
Guarantor of any kind whatsoever.
SECTION 11.14. No Obligation To Take Action Against
the Company.
------------------------------------
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Obligations or against the Company or any other Person or any
property of the Company or any other Person before the Trustee is entitled to
demand payment and performance by any or all Guarantors of their liabilities and
obligations under their Guarantees or under this Indenture.
SECTION 11.15. Dealing with the Company and Others.
-----------------------------------
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
<PAGE>
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(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given by
the Company or any third party with respect to the obligations or matters
contemplated by this Indenture or the Securities;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as the
Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal with,
the Company and all other Persons and any security as the Holders or the
Trustee may see fit.
SECTION 11.16. Default and Enforcement.
-----------------------
If any Guarantor fails to pay in accordance with Section 11.06 hereof,
the Trustee may proceed in its name as trustee hereunder in the enforcement of
the Guarantee of any such Guarantor and such Guarantor's obligations thereunder
and hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from such Guarantor the obligations.
SECTION 11.17. Amendment, Etc.
--------------
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any Guarantor
or any other Person from any such provision will in any event be effective
unless it is signed by such Guarantor and the Trustee.
SECTION 11.18. Acknowledgment.
--------------
Each Guarantor hereby acknowledges communication of the terms of this
Indenture and the Securities and consents to and approves of the same.
<PAGE>
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SECTION 11.19. Costs and Expenses.
------------------
Each Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees on a solicitor and
client basis) incurred by the Trustee, its agents, advisors and counsel or any
of the Holders in enforcing any of their rights under any Guarantee.
SECTION 11.20. No Merger or Waiver; Cumulative Remedies.
----------------------------------------
No Guarantee shall operate by way of merger of any of the obligations
of a Guarantor under any other agreement, including, without limitation, this
Indenture. No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, remedy, power or privilege hereunder or under
this Indenture or the Securities, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder or under this Indenture or the Securities preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges in the Guarantee and
under this Indenture, the Securities and any other document or instrument
between a Guarantor and/or the Company and the Trustee are cumulative and not
exclusive of any rights, remedies, powers and privilege provided by law.
SECTION 11.21. Survival of Obligations.
-----------------------
Without prejudice to the survival of any of the other obligations of
each Guarantor hereunder, the obligations of each Guarantor under Section 11.01
shall survive the payment in full of the Obligations under the Securities, but
only if and to the extent such payment is avoided, and in such case shall be
enforceable against such Guarantor to the same extent as prior to any such
payment and without regard to and without giving effect to any defense, right of
offset or counterclaim available to or which may be asserted by the Company or
any Guarantor.
SECTION 11.22. Guarantee in Addition to Other Obligations.
------------------------------------------
The Obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other Obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Securities and any guarantees or security at any time held by or for the benefit
of any of them.
<PAGE>
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SECTION 11.23. Severability.
------------
Any provision of this Article Eleven which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Eleven.
SECTION 11.24. Successors and Assigns.
----------------------
Each Guarantee shall be binding upon and inure to the benefit of each
Guarantor and the Trustee and the other Holders and their respective successors
and permitted assigns, except that no Guarantor may assign any of its
obligations hereunder or thereunder.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated
to Guarantor Senior Debt.
----------------------------------
Anything herein to the contrary notwithstanding, each of the
Guarantors, for itself and its successors, and each Holder, by his or her
acceptance of Guarantees, agrees that the payment of all Obligations owing to
the Holders in respect of its Guarantee (collectively, as to any Guarantor, its
"Guarantee Obligations") is subordinated, to the extent and in the manner
---------------------
provided in this Article Twelve, to the prior payment in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of
such Guarantor.
This Article Twelve shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Guarantor Senior Debt, and such
provisions are made for the benefit of the holders of Guarantor Senior Debt and
such holders are made obligees hereunder and any one or more of them may enforce
such provisions.
<PAGE>
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SECTION 12.02. Suspension of Guarantee Obligations
When Guarantor Senior Debt Is in Default.
----------------------------------------
(a) Unless Section 12.03 shall be applicable, if any payment default
occurs and is continuing with respect to any Guarantor Senior Debt, then no
payment of any kind or character shall be made by or on behalf of such Guarantor
or any other Person on its behalf with respect to any Guarantee Obligations or
to acquire any of the Securities for cash or property or otherwise and until
such payment default shall have been cured or waived or shall have ceased to
exist or such Guarantor Senior Debt shall have been discharged or paid in full
in cash or Cash Equivalents, after which such Guarantor shall (subject to the
other provisions of this Article Twelve) resume making any and all required
payments in respect of its obligations under this Guarantee, including any
missed payments.
(b) At any time while any Payment Blockage Period is in existence,
neither any Guarantor nor any other Person on any Guarantor's behalf shall (x)
make any payment of any kind or character with respect to any Obligations on its
Guarantee or (y) acquire any of the Securities for cash or otherwise.
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by the foregoing provisions of this Section 12.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Guarantor Senior Debt (pro rata to such holders on the basis of the respective
--- ----
amount of Guarantor Senior Debt held by such holders) or their respective
Representatives, as their respective interests may appear. The Trustee shall be
entitled to rely on information regarding amounts then due and owing on the
Guarantor Senior Debt, if any, received from the holders of Guarantor Senior
Debt (or their Representatives) or, if such information is not received from
such holders or their Representatives, from a Guarantor and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Guarantor Senior Debt.
SECTION 12.03. Guarantee Obligations Subordinated to
Prior Payment of All Guarantor Senior
Debt on Dissolution, Liquidation or
Reorganization of Such Guarantor.
-------------------------------------
(a) Upon any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolu-
<PAGE>
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tion, winding-up, reorganization, assignment for the benefit of creditors or
marshaling of assets of such Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to such Guarantor
or its property, whether voluntary or involuntary, all Obligations due or to
become due upon all Guarantor Senior Debt shall first be paid in full in cash or
Cash Equivalents, or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt, before any payment or distribution of any kind
or character is made on account of any Guarantee Obligations or for the
acquisition of any of the Securities for cash or property or otherwise. Upon any
such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of such Guarantor of
any kind or character, whether in cash, property or securities, to which the
Holders or the Trustee under this Indenture would be entitled, except for the
provisions hereof, shall be paid by such Guarantor or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under this Indenture if
received by them, directly to the holders of Guarantor Senior Debt (pro rata to
--------
such holders on the basis of the respective amounts of Guarantor Senior Debt
held by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of Guarantor Senior Debt remaining unpaid until all such
Guarantor Senior Debt has been paid in full in cash or Cash Equivalents after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether by or
on behalf of a Guarantor, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Guarantor Senior Debt or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred.
<PAGE>
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(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of any Guarantor of any kind or character, whether in
cash, property or securities, shall be received by any Holder when such payment
or distribution is prohibited by this Section 12.03(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders
--- ----
on the basis of the respective amount of Guarantor Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Guarantor Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Guarantor Senior Debt.
(d) The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
a Guarantor following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Guarantor
Senior Debt shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation shall,
as a part of such consolidation, merger, conveyance or transfer, assumes the
Guarantee of such Guarantor hereunder in accordance with Article Five hereof.
SECTION 12.04. Payments May Be Paid Prior
to Dissolution.
--------------------------
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) any Guarantor, except under the conditions described
in Sections 12.02 and 12.03, from making payments at any time for the purpose of
making payments on Guarantee Obligations, or from depositing with the Trustee
any moneys for such payments, or (ii) in the absence of actual knowledge by the
Trustee that a given payment would be prohibited by Section 12.02 or 12.03, the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments on Guarantee Obligations to the Holders entitled thereto
unless at least two Business Days prior to the date upon which such payment
would otherwise become due and payable a Responsible Officer shall have actually
received the written
<PAGE>
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notice provided for in the first sentence of Section 10.02(b) or in Section
12.07 (provided that, notwithstanding the foregoing, the Holders receiving any
--------
payments made in contravention of Sections 12.02 and/or 12.03 (and the
respective such payments) shall otherwise be subject to the provisions of
Section 12.02(a) and Section 12.03). Each Guarantor shall give prompt written
notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of such Guarantor, although any delay or failure to give any such
notice shall have no effect on the subordination provisions contained herein.
SECTION 12.05. Holders of Guarantee Obligations
To Be Subrogated to Rights of
Holders of Guarantor Senior Debt.
--------------------------------
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt, the Holders of Guarantee Obligations of any Guarantor
shall be subrogated to the rights of the holders of Guarantor Senior Debt of
such Guarantor to receive payments or distributions of cash, property or
securities of such Guarantor applicable to such Guarantor Senior Debt until all
amounts owing on or in respect of the Guarantee Obligations shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of such Guarantor Senior Debt by or on behalf of
such Guarantor, or by or on behalf of the Holders by virtue of this Article
Twelve, which otherwise would have been made to the Holders shall, as between
such Guarantor and the Holders, be deemed to be a payment by such Guarantor to
or on account of such Guarantor Senior Debt, it being understood that the
provisions of this Article Twelve are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
Guarantor Senior Debt, on the other hand.
SECTION 12.06. Obligations of the Guarantors Unconditional.
-------------------------------------------
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Guarantees is intended to or shall impair, as among the
Guarantors, their creditors other than the holders of Guarantor Senior Debt, and
the Holders, the obligation of the Guarantors, which is absolute and
unconditional, to pay to the Holders all amounts due and payable under the
Guarantees as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Guarantors other than the holders of the Guarantor
Senior Debt, nor shall anything herein or therein prevent any Holder or the
<PAGE>
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Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
in respect of cash, property or securities of the Guarantors received upon the
exercise of any such remedy.
SECTION 12.07. Notice to Trustee.
-----------------
Each Guarantor shall give prompt written notice to the Trustee of any
fact known to such Guarantor which would prohibit the making of any payment to
or by the Trustee in respect of the Guarantees pursuant to the provisions of
this Article Twelve, although any delay or failure to give any such notice shall
have no effect on the subordination provisions contained herein. Regardless of
anything to the contrary contained in this Article Twelve or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior Debt or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
a Guarantor, or from a holder of Guarantor Senior Debt or a Representative
therefor, and, prior to the receipt of any such written notice, the Trustee
shall be entitled to assume (in the absence of actual knowledge to the contrary)
that no such facts exist. The Trustee shall be entitled to rely on the delivery
to it of any notice pursuant to this Section 12.07 to establish that such notice
has been given by a holder of Guarantor Senior Debt (or a Representative
therefor).
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Twelve, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior
Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Twelve, and if such evidence is not
furnished the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
<PAGE>
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SECTION 12.08. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of a Guarantor referred to
in this Article Twelve, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which any insolvency, bankruptcy,
receivership, dissolution, winding-up, liquidation, reorganization or similar
case or proceeding is pending, or upon a certificate of the trustee in
bankruptcy, liquidating trustee, receiver, assignee for the benefit of
creditors, agent or other Person making such payment or distribution, delivered
to the Trustee or the Holders, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve.
SECTION 12.09. Trustee's Relation to Guarantor Senior Debt.
-------------------------------------------
The Trustee and any agent of a Guarantor or the Trustee shall be
entitled to all the rights set forth in this Article Twelve with respect to any
Guarantor Senior Debt which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Twelve, and no implied covenants
or obligations with respect to the holders of Guarantor Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Guarantor Senior Debt.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice may
be given to their Representative, if any.
<PAGE>
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SECTION 12.10. Subordination Rights Not Impaired by
Acts or Omissions of the Guarantors or
Holders of Guarantor Senior Debt.
--------------------------------------
No right of any present or future holders of any Guarantor Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by any Guarantor with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Securities and without
impairing or releasing the subordination provided in this Article Twelve or the
obligations hereunder of the Holders of the Securities to the holders of
Guarantor Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner
Guarantor Senior Debt, or any instrument evidencing the same or any agreement
under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Guarantor Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain
from exercising any rights against the Guarantors and any other Person.
SECTION 12.11. Holders Authorize Trustee To Effectuate
Subordination of Guarantee Obligations.
---------------------------------------
Each Holder of Guarantee Obligations by its acceptance of them
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate, as between the holders of
Guarantor Senior Debt and the Holders, the subordination provided in this
Article Twelve, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of credits or otherwise) tending towards liquidation of the business
and assets of any Guarantor, the filing of a claim
<PAGE>
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for the unpaid balance under its Guarantee Obligations and accrued interest in
the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior Debt
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Guarantee Obligations. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Guarantee Obligations or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 12.12. This Article Twelve Not To Prevent Events of Default.
--------------------------
The failure to make a payment on account of principal of or interest
on the Guarantees by reason of any provision of this Article Twelve will not be
construed as preventing the occurrence of an Event of Default.
SECTION 12.13. Trustee's Compensation Not Prejudiced.
---------------
Nothing in this Article Twelve will apply to amounts due to the
Trustee pursuant to other sections of this Indenture.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
<PAGE>
-135-
SECTION 13.02. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company or a Guarantor:
Pacer International, Inc.
3746 Mt. Diablo Blvd., Suite 110
Lafayette, CA 94549
Attention: Donald C. Orris
Telephone: (925) 284-7145
Telecopy: (925) 299-1939
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Morton A. Pierce
Douglas L. Getter
Telephone: (212) 259-8000
Telecopy: (212) 259-6333
if to the Trustee for purposes of Section 2.03 and 4.06:
Wilmington Trust Company
c/o Wilmington Trust FSB
520 Madison Avenue, 33rd Floor
New York, New York 10022
if to the Trustee for any other purpose:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Telephone: (302) 651-8681
Telecopy: (302) 651-8882
<PAGE>
-136-
Each of the Company and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee, shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders
with Other Holders.
-------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture, the
Securities or the Guarantees. The Company, the Trustee, the Registrar and any
other Person shall have the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as
to Conditions Precedent.
--------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed or effected by the Company, if any, provided for
in this Indenture relating to the proposed action have been complied with;
and
<PAGE>
-137-
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, any and all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
----------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
--------
however, that with respect to matters of fact an Opinion of Counsel may
-------
rely on an Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee, Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 13.07. Legal Holidays.
--------------
If a payment date is not a Business Day, payment may be made on the
next succeeding day that is a Business Day.
SECTION 13.08. Governing Law.
-------------
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
<PAGE>
-138-
PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture, the Securities or the
Guarantees.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
----------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
--------------------------
No director, officer, employee or stockholder of the Company or any
Subsidiary, as such, shall have any liability for any obligations of the Company
under the Securities, this Indenture or the Guarantees or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
----------
All agreements of the Company and the Guarantors in this Indenture,
the Securities and the Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 13.13. Severability.
------------
In case any one or more of the provisions in this Indenture, in the
Securities or in the Guarantees shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first written above.
ISSUER
PACER INTERNATIONAL, INC.,
By: /s/ Donald C. Orris
__________________________
Name: Donald C. Orris
Title: Chairman, President and Chief Executive
Officer
<PAGE>
S-2
GUARANTORS
PACER LOGISTICS, INC.,
CROSS CON TRANSPORT, INC.,
CROSS CON TERMINALS, INC.,
PACIFIC MOTOR TRANSPORT COMPANY,
PACER EXPRESS, INC.,
PACER INTEGRATED LOGISTICS, INC.,
PLM ACQUISITION CORPORATION,
MANUFACTURERS CONSOLIDATION
SERVICE, INC.,
LEVCON, INC.,
MANUFACTURERS CONSOLIDATION
SERVICE OF CANADA, INC.,
INTERSTATE CONSOLIDATION SERVICE,
INC.,
INTERSTATE CONSOLIDATION, INC.,
INTERMODAL CONTAINER SERVICE,
INC.,
KEYSTONE TERMINALS ACQUISITION
CORP.
By: /s/ Lawrence C. Yarberry
__________________________
Name: Lawrence C. Yarberry
Title: Executive Vice President
<PAGE>
S-3
PACER INTERNATIONAL RAIL SERVICES
LLC,
PACER INTERNATIONAL CONSULTING
LLC,
PACER RAIL SERVICES LLC,
By: PACER LOGISTICS, INC.,
as Manager
By: /s/ Lawrence C. Yarberry
__________________________
Name: Lawrence C. Yarberry
Title: Executive Vice President
<PAGE>
S-4
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ James D. Nesci
___________________________
Name: James D. Nesci
Title: Authorized Signer
<PAGE>
Exhibit A
---------
[FORM OF INITIAL NOTE]
[FACE OF SECURITY]
PACER INTERNATIONAL, INC.
11 3/4% Senior Subordinated Note
due 2007
CUSIP No.
No. $
PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of $
Dollars, on June 1, 2007.
Interest Payment Dates: June 1 and December 1, commencing December 1,
1999.
Record Dates: May 15 and November 15.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
PACER INTERNATIONAL, INC.
By: ______________________
Name:
Title:
By: ______________________
Name
Title:
<PAGE>
-2-
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11 3/4% Senior Subordinated Notes due 2007
described in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
as Trustee
By: _________________________
Authorized Signatory
<PAGE>
-3-
[REVERSE OF SECURITY]
PACER INTERNATIONAL, INC.
11 3/4% Senior Subordinated Note
due 2007
1. Interest.
--------
PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on June 1
and December 1 of each year (the "Interest Payment Date"), commencing December
1, 1999. Interest on this Security will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from and
including May 28, 1999. Interest on this Security will be computed on the basis
of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand at the rate borne by this Security plus 2% and on overdue installments
of interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are canceled on registration of transfer or registration of exchange
(including pursuant to an Exchange Offer (as defined in the Indenture)) after
such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of federal funds, or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
<PAGE>
-4-
3. Paying Agent and Registrar.
--------------------------
Initially, Wilmington Trust Company (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar or co-Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of May
28, 1999 (the "Indenture"), among the Company, the Guarantors named therein and
the Trustee. This Security is one of a duly authorized issue of Initial Notes
of the Company designated as its 11 3/4% Senior Subordinated Notes due 2007 (the
"Initial Notes"). Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general obligations of the Company unlimited in amount, of which
an aggregate principal amount of $150,000,000 are being issued on the Issue
Date.
5. Subordination.
-------------
The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Senior Debt of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. Optional Redemption.
-------------------
The Company may redeem the Securities, in whole at any time or in part
from time to time, on and after June 1,
<PAGE>
-5-
2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on June 1 of the years set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:
Year Percentage
---- ----------
2003.................................. 105.875%
2004.................................. 102.938%
2005 and thereafter................... 100.000%
In addition, at any time prior to June 1, 2003, upon the occurrence of
a Change of Control, the Company may redeem the Securities, in whole but not in
part, at a redemption price equal to the principal amount thereof plus the
Applicable Premium plus accrued and unpaid interest, if any, to the date of
redemption. Notice of redemption of the Securities pursuant to this paragraph
shall be mailed to Holders of the Securities not more than 30 days following the
occurrence of a Change of Control. The Company may not redeem Securities
pursuant to this paragraph if it has made an offer to repurchase Securities with
respect to such Change of Control.
7. Optional Redemption upon Equity Offerings.
-----------------------------------------
At any time, or from time to time, on or prior to June 1, 2002, the
Company may, at its option, use the net cash proceeds of one or more Equity
Offerings to redeem up to 35% in aggregate principal amount of the Securities
originally issued under the Indenture at a redemption price equal to 111.750% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of redemption; provided, however, that after any such redemption the
-------- -------
aggregate principal amount of the Securities outstanding must equal at least 65%
of the aggregate amount of the Securities originally issued under the Indenture.
In order to effect the foregoing redemption with the net cash proceeds of any
Equity Offering, the Company shall make such redemption not more than 120 days
after the consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a public
or private sale of Qualified Capital Stock (other than public offerings with
respect to the Company's Common Stock on Form S-8) of the Company.
<PAGE>
-6-
8. Notice of Redemption.
--------------------
Notice of redemption shall be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at such Holder's registered address. Securities in
denominations of $1,000 may be redeemed only in whole. The Trustee may select
for redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption, subject to the provisions of the Indenture.
9. Change of Control Offer.
-----------------------
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
10. Limitation on Asset Sales.
-------------------------
The Company is, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount, plus accrued and
unpaid interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
11. Registration Rights.
-------------------
Pursuant to the Registration Rights Agreement, the Company will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Security shall have the right to exchange this Security for the Company's 11
3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes"), which
shall have been registered under the Securities Act, in like principal amount
and having terms identical in all material respects to the Initial Notes. The
Holders of the Initial
<PAGE>
-7-
Notes shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
12. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
13. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
14. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agent will repay the funds to the Company
at its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
15. Discharge Prior to Redemption or Maturity.
-----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
16. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding,
<PAGE>
-8-
and any existing Default or Event of Default or compliance with any provision
may be waived with the consent of the Holders of a majority in aggregate
principal amount of the Securities then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Securities and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
17. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge or sell all or
substantially all of its assets or to engage in transactions with affiliates.
The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
18. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
19. Trustee Dealings with Company.
-----------------------------
<PAGE>
-9-
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
20. No Recourse Against Others.
--------------------------
No stockholder, director, officer or employee, as such, of the Company
shall have any liability for any obligation of the Company under the Securities
or the Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
21. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
22. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
23. Governing Law.
-------------
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to applicable principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
24. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE>
-10-
25. Indenture.
---------
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture which has the text of this
Security in larger type. Requests may be made to: Pacer International, Inc.,
3746 Mt. Diablo Blvd. Suite 110, Lafayette, CA 94549, Attn: Donald C. Orris.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
______________________________________________________________________________
______________________________________________________________________________
(Print or type name, address and zip code of assignee or
transferee)
______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: _________________ Signed: _________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: _______________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resales of this Security
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) May 28, 2001, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Security is being transferred:
<PAGE>
-2-
[Check One]
---------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United States to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule
144 under the Securities Act; or
(6) __ pursuant to an effective registration statement under the
Securities Act; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act;
and unless the box below is checked, the undersigned confirms that such Security
is not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[_] The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided that if box (3), (4),
--------
(5) or (7) is checked, the Company or the Trustee may require, prior to
registering any such transfer of the Securities, in its sole discretion, such
legal opinions, certifications (including an investment letter in the case of
box (3) or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
<PAGE>
-3-
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Dated: __________________ Signed: ____________________________________
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee: _________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ ________________________________
NOTICE: To be executed by
an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount: $___________
Dated: _________________ Signed: _________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
EXHIBIT B
---------
[FORM OF EXCHANGE NOTE]
[FACE OF SECURITY]
PACER INTERNATIONAL, INC.
11 3/4% Senior Subordinated Note
due 2007
CUSIP No.
No. $
PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of $
Dollars, on June 1, 2007.
Interest Payment Dates: June 1 and December 1, commencing December 1,
1999.
Record Dates: May 15 and November 15.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
PACER INTERNATIONAL, INC.
By: ______________________
Name:
Title:
By: ______________________
Name
Title:
<PAGE>
-2-
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11 3/4% Senior Subordinated Notes due 2007
described in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
as Trustee
By: __________________________
Authorized Signatory
<PAGE>
-3-
[REVERSE OF SECURITY]
PACER INTERNATIONAL, INC.
11 3/4% Senior Subordinated Note
due 2007
1. Interest.
--------
PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on June 1
and December 1 of each year (the "Interest Payment Date"), commencing December
1, 1999. Interest on this Security will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from and
including May 28, 1999. Interest on this Security will be computed on the basis
of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand at the rate borne by this Security plus 2% and on overdue installments
of interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are canceled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by wire transfer of federal funds, or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
--------------------------
Initially, Wilmington Trust Company (the "Trustee") will act as Paying
Agent and Registrar. The Company may change
<PAGE>
-4-
any paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Registrar or co-Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of May
28, 1999 (the "Indenture"), among the Company, the Guarantors named therein and
the Trustee. This Security is one of a duly authorized issue of Exchange Notes
of the Company designated as its 11 3/4% Senior Subordinated Notes due 2007 (the
"Exchange Notes"). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general obligations of the Company unlimited in amount, of which
an aggregate principal amount of $150,000,000 are being issued on the Issue
Date.
5. Subordination.
-------------
The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Senior Debt of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. Optional Redemption.
-------------------
The Company may redeem the Securities, in whole at any time or in part
from time to time, on and after June 1, 2003, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on June 1 of the years set forth below,
<PAGE>
-5-
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
---- ----------
2003....................................... 105.875%
2004....................................... 102.938%
2005 and thereafter........................ 100.000%
In addition, at any time prior to June 1, 2003, upon the occurrence of
a Change of Control, the Company may redeem the Securities, in whole but not in
part, at a redemption price equal to the principal amount thereof plus the
Applicable Premium plus accrued and unpaid interest, if any, to the date of
redemption. Notice of redemption of the Securities pursuant to this paragraph
shall be mailed to Holders of the Securities not more than 30 days following the
occurrence of a Change of Control. The Company may not redeem Securities
pursuant to this paragraph if it has made an offer to repurchase Securities with
respect to such Change of Control.
7. Optional Redemption upon Equity Offerings.
-----------------------------------------
At any time, or from time to time, on or prior to June 1, 2002, the
Company may, at its option, use the net cash proceeds of one or more Equity
Offerings to redeem up to 35% in aggregate principal amount of the Securities
originally issued under the Indenture at a redemption price equal to 111.750% of
the principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of redemption; provided, however, that after any such redemption the
-------- -------
aggregate principal amount of the Securities outstanding must equal at least 65%
of the aggregate amount of the Securities originally issued under the Indenture.
In order to effect the foregoing redemption with the net cash proceeds of any
Equity Offering, the Company shall make such redemption not more than 120 days
after the consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a public
or private sale of Qualified Capital Stock (other than public offerings with
respect to the Company's Common Stock on Form S-8) of the Company.
8. Notice of Redemption.
--------------------
Notice of redemption shall be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at
<PAGE>
-6-
such Holder's registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption, subject to the provisions of the Indenture.
9. Change of Control Offer.
-----------------------
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
10. Limitation on Asset Sales.
-------------------------
The Company is, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount, plus accrued and
unpaid interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
11. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
<PAGE>
-7-
12. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
13. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agent will repay the funds to the Company
at its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
14. Discharge Prior to Redemption or Maturity.
-----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
15. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
16. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restric-
<PAGE>
-8-
tions on dividends and other payments by Restricted Subsidiaries of the Company
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
17. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
18. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
19. No Recourse Against Others.
--------------------------
No stockholder, director, officer or employee, as such, of the Company
shall have any liability for any obligation of the Company under the Securities
or the Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
<PAGE>
-9-
20. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
21. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. Governing Law.
-------------
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to applicable principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
23. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
24. Indenture.
---------
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture which has the text of this
Security in larger type. Requests may be made to: Pacer International, Inc.,
3746 Mt. Diablo Blvd. Suite 110, Lafayette, CA 94549, Attn: Donald C. Orris.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or
transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _________________ Signed: ____________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: _________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount: $___________
Dated: _________________ Signed: _________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: _______________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT C
---------
GUARANTEE
---------
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Security
the cash payments in United States dollars of principal of, premium, if any, and
interest on this Security in the amounts and at the times when due and interest
on the overdue principal, premium, if any, and interest, if any, of this
Security, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture (as defined below) or the Securities, to the
Holder of this Security and the Trustee, all in accordance with and subject to
the terms and limitations of this Security, Article Eleven of the Indenture and
this Guarantee. This Guarantee will become effective in accordance with Article
Eleven of the Indenture and its terms shall be evidenced therein. The validity
and enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Security.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of May 28, 1999, among Pacer
International, Inc., a Tennessee corporation, as issuer (the "Company"), the
Guarantors named therein and Wilmington Trust Company, as trustee (the
"Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Eleven of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. The undersigned Guarantor hereby agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly
executed.
GUARANTORS
PACER LOGISTICS, INC.,
CROSS CON TRANSPORT, INC.,
CROSS CON TERMINALS, INC.,
PACER INTERNATIONAL RAIL SERVICES
LLC,
PACER INTERNATIONAL CONSULTING
LLC,
PACER RAIL SERVICES LLC,
PACIFIC MOTOR TRANSPORT COMPANY,
PACER EXPRESS, INC.,
PACER INTEGRATED LOGISTICS, INC.,
PLM ACQUISITION CORPORATION,
MANUFACTURERS CONSOLIDATION
SERVICE, INC.,
LEVCON, INC.,
MANUFACTURERS CONSOLIDATION
SERVICE OF CANADA, INC.,
INTERSTATE CONSOLIDATION SERVICE,
INC.,
INTERSTATE CONSOLIDATION, INC.,
INTERMODAL CONTAINER SERVICE,
INC.,
KEYSTONE TERMINALS ACQUISITION
CORP.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
<PAGE>
Exhibit D
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
[Date]
Attention:
Re: Pacer International, Inc.
11 3/4% Senior Subordinated Notes due 2007
(the "Securities")
------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of the Securities of Pacer
International, Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated May 24, 1999 relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i)-
(iii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
-2-
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Securities prior to the
date which is two years after the original issuance of the Securities, we will
do so only (i) to the Company or any of its subsidiaries, (ii) inside the United
States in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act), (iii)
inside the United States to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to the Trustee (as defined in the Indenture relating to
the Securities), a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Securities, (iv)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will
not transfer the Securities to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are
<PAGE>
-3-
each able to bear the economic risk of our or their investment, as the case may
be.
7. We are acquiring the Securities purchased by us for our account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By: ____________________________
Name:
Title:
<PAGE>
Exhibit E
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
[Date]
Attention:
Re: Pacer International, Inc. (the "Company")
11 3/4% Senior Subordinated Notes due 2007
(the "Securities")
------------------
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
<PAGE>
-2-
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________
Authorized Signature
<PAGE>
Exhibit 4.4
-----------
STOCK PURCHASE AGREEMENT
by and between
APL LIMITED
and
COYOTE ACQUISITION LLC
Dated as of March 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Purchase and Sale 1
-----------------
I.1 Purchase and Sale 1
-----------------
I.2 Purchase Price 2
--------------
I.3 The Post-Closing Payment 2
------------------------
I.4 Payment of Purchase Price 4
-------------------------
I.5 Closing 4
-------
I.6 Financing Fees; Capitalization 4
------------------------------
ARTICLE II Representations and Warranties of APL 4
-------------------------------------
II.1 Organization and Authority 4
--------------------------
II.2 Noncontravention 5
----------------
II.3 No Governmental Consent or Approval Required 6
--------------------------------------------
II.4 Organization and Authority of the Company 6
-----------------------------------------
II.5 Capitalization of the Company 7
-----------------------------
II.6 Financial Statements 7
--------------------
II.7 Books and Records 8
-----------------
II.8 Undisclosed Liabilities 9
-----------------------
II.9 Accounts and Notes Receivable 9
-----------------------------
II.10 Absence of Certain Developments 9
-------------------------------
II.11 Customers 10
---------
II.12 Title to Properties 11
-------------------
II.13 Assets 11
------
II.14 Contracts 12
---------
II.15 Litigation 12
----------
II.16 Compliance with Law; Permits 13
----------------------------
II.17 Employee Benefit Plans 13
----------------------
II.18 Certain Interests 16
-----------------
II.19 Insurance 16
---------
II.20 Consequences of Stock Purchase 17
------------------------------
II.21 Intercompany Transactions 17
-------------------------
II.22 No Brokers or Finders 17
---------------------
II.23 Environmental Matters 17
---------------------
II.24 Intellectual Property 19
---------------------
II.25 Year 2000 Compliance. 20
--------------------
II.26 Disclosure 21
----------
II.27 Labor Relations 21
---------------
II.28 Working Capital; Net Fixed Assets 21
---------------------------------
ARTICLE III Representations and Warranties of the Purchaser 21
-----------------------------------------------
III.1 Organization and Authority 22
--------------------------
III.2 Noncontravention 22
----------------
III.3 No Governmental Consent or Approval Required 22
--------------------------------------------
III.4 Financial Capability 23
--------------------
III.5 Purchase for Investment 23
-----------------------
III.6 Pacer Acquisition 23
-----------------
III.7 Capitalization of the Company 24
-----------------------------
ARTICLE IV Covenants 24
---------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
IV.1 Cooperation and Access 25
----------------------
IV.2 No Solicitation 26
---------------
IV.3 Conduct of Business Prior to the Closing 26
----------------------------------------
IV.4 Commercially Reasonable Efforts; Government Approvals 30
-----------------------------------------------------
IV.5 Use of APL Name and Trademark 31
-----------------------------
IV.6 Confidentiality 32
---------------
IV.7 Employee Benefits; Employees 32
----------------------------
IV.8 Insurance 33
---------
IV.9 Warn Act 34
--------
IV.10 Other Actions 34
-------------
IV.11 Advice of Changes 34
-----------------
IV.12 Financial Information 35
---------------------
IV.13 Accounts Payable, Accrued Expenses and Accounts Receivable 35
----------------------------------------------------------
IV.14 Pacer Indemnification 35
---------------------
IV.15 Conduct of Business Following the Closing 36
-----------------------------------------
ARTICLE V Tax Matters 36
-----------
V.1 Definitions 36
-----------
V.2 Tax-Related Representations and Warranties 37
------------------------------------------
V.3 Liability for Taxes and Related Matters 39
---------------------------------------
(a) Liability of APL for Taxes. APL shall indemnify,
--------------------------
defend and hold the Purchaser, the Company and
their respective officers, directors, employees,
Affiliates and agents (each, a 40
(b) Liability of Purchaser for Taxes 40
--------------------------------
(c) Tax Periods 40
-----------
V.4 Adjustment to Purchase Price 40
----------------------------
V.5 Tax Covenants 40
-------------
V.6 Transfer Taxes 43
--------------
V.7 Information to be Provided by the Purchaser 44
-------------------------------------------
V.8 Tax Proceedings 44
---------------
(a) Right to Control Proceedings 44
----------------------------
(b) Notice; Reports 44
---------------
V.9 Assistance and Cooperation 45
--------------------------
V.10 Survival, Etc. 46
-------------
ARTICLE VI Conditions to Closing 46
---------------------
VI.1 Conditions to the Obligations of the Purchaser 46
----------------------------------------------
(a) Approvals 46
---------
(b) Orders 47
------
(c) Accuracy of Representations 47
---------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(d) Performance of Covenants 47
------------------------
(e) Resignation of Directors 47
------------------------
(f) Ancillary Agreements 47
--------------------
(g) Intercompany Accounts 47
---------------------
VI.2 Conditions to the Obligations of APL 49
------------------------------------
(a) Approvals 49
---------
(b) Orders 49
------
(c) Accuracy of Representations 49
---------------------------
(d) Performance of Covenants 49
------------------------
(e) Ancillary Agreements 49
--------------------
(f) Shareholder Vote. The shareholders of NOL shall have
approved the transactions contemplated hereby pursuant
to an extraordinary general meeting. 50
VI.3 Pacer Extension 50
---------------
ARTICLE VII Termination 50
-----------
VII.1 Grounds for Termination 50
-----------------------
VII.2 Effect of Termination 52
---------------------
VII.3 Interest 53
--------
ARTICLE VIII Indemnification 54
---------------
VIII.1 Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Agreements 54
----------
VIII.2 Indemnification 54
---------------
VIII.3 Method of Asserting Claims, etc. 55
-------------------------------
VIII.4 Limitation on Damages 56
---------------------
VIII.5 Exclusive Remedy 57
----------------
VIII.6 Insurance Proceeds; Interest 57
----------------------------
VIII.7 Deductible; Maximum Liability 57
-----------------------------
VIII.8 Tax Losses 58
----------
ARTICLE IX Certain Definitions 58
-------------------
IX.1 Certain Definitions 58
-------------------
ARTICLE X Miscellaneous 66
-------------
X.1 Amendments 66
----------
X.2 Assignment 66
----------
X.3 Notices 66
-------
X.4 Severability 68
------------
X.5 Governing Law 68
-------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
X.6 Interpretation 68
--------------
X.7 Entire Agreement 68
----------------
X.8 Publicity 69
---------
X.9 Expenses 69
--------
X.10 No Third Party Beneficiaries 69
----------------------------
X.11 Jurisdiction 69
------------
X.12 Counterparts 70
------------
</TABLE>
<PAGE>
EXHIBITS
A. Non-Competition Agreement
B. Administrative Services Agreement
C. Information Technology Access and License Agreement Terms
D. Stacktrain Services Agreement
E. TPI Chassis Sublet Agreement
F. Equipment Supply Agreement
G. Shareholders Agreement
H-1. Financing Letter of Morgan Stanley & Co., Inc.
H-2. Financing Letter of Bankers Trust Company
I. Union Pacific Terms
J. CSX Memorandum of Understanding
K. Tax Sharing Agreement
L. Working Capital Analysis
SCHEDULES
---------
2.4 Directors and Executive Officers of the Company
2.6(c) Consolidated Accounts Payable, Accrued Expenses and
Accounts Receivable
2.8 Undisclosed Liabilities
2.9 Accounts and Notes Receivable
2.10 Absence of Certain Developments
2.11 Customers
2.12(b) Real Property
2.14(a) Material Contracts
2.14(b) Noncontravention and Breaches of Material Contracts
2.15 Litigation
2.16 Compliance with the Law/Governmental Permits
2.17(a) Employee Benefit Plans
2.17(g) Employee Benefits Provided After Retirement
2.19 Insurance
2.21 Intercompany Transactions
2.23 Environmental Matters
2.24 Intellectual Property
4.5 APL Corporate Logo
4.7(b) Employees
5.2(b) Tax Returns
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as March 15, 1999, is made by and
between Coyote Acquisition LLC, a Delaware limited liability company (the
"Purchaser"), and APL Limited, a Delaware corporation ("APL").
RECITALS
A. APL owns 1,000 shares of Common Stock, no par value (the "Stock")
of APL Land Transport Services, Inc., a Tennessee corporation (the "Company"),
constituting all of the issued and outstanding capital stock of the Company.
B. The Company is engaged in the Business (this and other
capitalized terms shall have the meanings assigned to such terms in Article IX).
C. The Purchaser desires to purchase the Stock, and APL desires to
sell the Stock to the Purchaser, all on the terms and conditions set forth
herein.
D. The Purchaser and APL desire that this transaction be eligible
for election under Section 338(h)(10) of the Internal Revenue Code with respect
to the acquisition of the Company by the Purchaser.
NOW THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants and conditions contained herein, the
parties hereto agree as follows:
ARTICLE I
Purchase and Sale
-----------------
I.1 Purchase and Sale. Upon the terms and subject to the conditions
-----------------
of this Agreement, APL shall sell to the Purchaser, and the Purchaser shall
purchase from APL, shares of Stock (the "Shares") at the Closing and APL shall
deliver at the Closing a certificate evidencing the Shares, properly endorsed,
or accompanied by a duly executed stock power duly endorsed, in blank; provided
that a portion of
-1-
<PAGE>
the Shares may be purchased by the Company at the Closing with the proceeds of
the debt financing contemplated by the Financing Letters. The numbers of shares
retained by APL shall be calculated based on (i) the value of the number of
shares of Stock of the Company not sold by APL pursuant to this Agreement
divided by (ii) the value of each share of Stock of the Company based on the
equity investment made by the Purchaser in the Company.
I.2 Purchase Price. In consideration for the Shares and as payment
--------------
in full therefor, the Purchaser shall pay to APL the Purchase Price. The
"Purchase Price" is $300 million, of which (i) at least $292.5 million will be
in cash payable on the Closing Date and (ii) up to $7.5 million will be in value
of shares of Stock of the Company not sold by APL pursuant to this Agreement.
In addition, the Purchaser shall pay to APL up to $15 million in cash (the
"Post-Closing Payment") to be earned to the extent that net income before (plus)
allocated corporate overhead charges, management fees payable to any Affiliate
of the Purchaser, interest, taxes, depreciation, amortization, one-time charges
related to the consummation of the transactions contemplated hereby and
nonrecurring losses and after (less) one-time benefits related to the
consummation of the transactions contemplated hereby and nonrecurring gains
("EBITDA") of the Company for the fiscal year ending December 31, 1999 ("Actual
EBITDA") is equal to or greater than $57 million (the "EBITDA Target").
Nonrecurring gains and losses shall be calculated as reasonably agreed by
Purchaser and APL, subject to the provisions of Section 1.3 relating to an
Objection. The Post-Closing Payment will be reduced by an amount equal to the
product of (x) 5.5 and (y) the amount that Actual EBITDA is below the EBITDA
Target.
I.3 The Post-Closing Payment. Within 90 days of the Company's 1999
------------------------
fiscal year end, the Purchaser shall deliver or cause to be delivered to APL an
income statement of the Company for the fiscal year ending December 31, 1999(the
"Final Income Statement"). The Final Income Statement shall be prepared in
accordance with GAAP, consistently applied with the Financial Statements, and
shall not include the consolidated or unconsolidated information of any entity
or business other than the Company or the Business. The Purchaser shall use
commercially reasonable efforts to maintain its books and records such that the
Final Income Statement can be so prepared and
-2-
<PAGE>
verified. Not later than 30 days after receipt of the Final Income Statement,
APL may deliver to the Purchaser a written notice ("Objection"), setting forth
any items with which APL disagrees and a description of the bases for such
disagreement.
In the event that APL delivers an Objection to the Final Income
Statement or the Purchaser's calculation of Actual EBITDA, the Purchaser hereby
agrees to negotiate in good faith for a period of 30 days after receipt of such
Objection, to seek to resolve the difference with respect to the Final Income
Statement and calculation of Actual EBITDA. If APL and the Purchaser are unable
to resolve all such disagreements within such 30 day period, then no later than
seven days following such 30 day period they shall refer their remaining
differences to any internationally recognized firm of independent public
accountants as to which APL and the Purchaser agree (the "Independent Firm") who
shall, acting as experts and not as arbitrators, determine, only with respect to
the remaining differences so submitted, whether and to what extent, if any, the
Final Income Statement or the calculation of Actual EBITDA requires adjustment.
APL and the Purchaser shall instruct the Independent Firm to deliver its written
determination to them no later than the twentieth day after the remaining
differences underlying the Objections are referred to the Independent Firm. The
Independent Firm's determination shall be conclusive and binding upon APL and
the Purchaser absent manifest error. The fees and disbursements of the
Independent Firm shall be shared equally by APL and the Purchaser. APL and the
Purchaser shall make readily available to the Independent Firm all relevant
books and records and any work papers (including those of the parties'
respective accountants) relating to the Final Income Statement and all other
items reasonably requested by the Independent Firm.
The Post-Closing Payment shall be (i) $15 million if the Actual EBITDA
is greater than or equal to $57 million; (ii) $0 if the Actual EBITDA is less
than or equal to $54,272,728, and (iii) if the Actual EBITDA is greater than
$54,272,728 and less than $57 million, calculated in accordance with the
following formula:
$15 million - (5.5 * (EBITDA Target - Actual EBITDA))
-3-
<PAGE>
The Post-Closing Payment shall be due and payable no later than two
business days after resolving all Objections; provided that any portion of the
Post-Closing Payment as to which there is no disagreement shall be due and
payable no later than two business days after resolving all Objections with
respect to such amount.
I.4 Payment of Purchase Price. If the obligations of the parties to
-------------------------
proceed with the Closing set forth in Article VI are satisfied or waived, at the
Closing, the Purchaser shall pay APL the cash portion of the Purchase Price
payable on the Closing Date by wire transfer of immediately available funds to a
bank account designated by APL at least two business days prior to Closing.
I.5 Closing. The closing (the "Closing") of the purchase and sale
-------
of the Stock shall take place at the offices of Dewey Ballantine LLP, 1301
Avenue of the Americas, New York, New York 10019 as soon as practicable after
the satisfaction or waiver of the conditions set forth in Article VI, or at such
other time and place as the parties shall mutually agree. The date on which the
Closing actually occurs is herein referred to as the "Closing."
I.6 Financing Fees; Capitalization. The parties hereto agree that
------------------------------
commitment fees set forth in the Financing Letter attached as Exhibit I-1 shall
be borne equally by APL and the Purchaser; provided, however, that if and to
-------- -------
the extent any amounts are drawn under the bridge facility contemplated by such
Financing Letter to consummate the transactions contemplated by this Agreement,
APL shall pay all commitment fees and the Purchaser shall pay all funding fees
related thereto.
ARTICLE II
Representations and Warranties of APL
-------------------------------------
APL represents and warrants to the Purchaser that:
II.1 Organization and Authority. APL is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. APL has the requisite corporate power and authority to execute,
deliver and perform this Agreement and such other documents
-4-
<PAGE>
as are contemplated hereunder to be executed and delivered at or prior to the
Closing. The execution, delivery and performance by APL of this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of APL and the Company. This Agreement constitutes a valid and,
assuming due execution and delivery by the Purchaser, binding obligation of APL,
enforceable against APL in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally, and to general equitable principles. Upon execution
and delivery of the Ancillary Agreements by the parties thereto, such Ancillary
Agreements will constitute valid and binding obligations of APL, enforceable
against APL in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally, and to general equitable principles.
II.2 Noncontravention. The execution, delivery and performance of
----------------
this Agreement by APL, the performance of this Agreement by APL and the
consummation of the transactions contemplated hereby will not violate or
conflict with, or constitute a breach or default (with or without notice or
lapse of time, or both) under or give rise to any right of termination,
amendment, cancellation or acceleration of any obligations contained in or the
loss of any benefit under, (a) the certificate of incorporation or bylaws of APL
(b) any law, regulation, order, judgment or decree applicable to APL or the
Company or (c) except as disclosed in Schedule 2.14(b), any term, condition or
provision of any loan or credit agreement, note, bond, mortgage, indenture,
lease, sublease, material purchase order or other material agreement (including
any Material Contract), commitment, instrument, permit, concession, franchise or
license to which the Company is a party, or by which the Company or its assets
may be bound, in each case in clauses (b) or (c) above, which conflict or
violation would reasonably be expected to prevent or delay the consummation of
the transactions contemplated by this Agreement or any of the Ancillary
Agreements, result in a Lien on the Stock or give rise to any material claim
against the Company.
-5-
<PAGE>
II.3 No Governmental Consent or Approval Required. No authorization,
--------------------------------------------
consent, Permit, approval or other order of, declaration to, or registration,
qualification, designation or filing with, any Governmental Entity is required
for or in connection with the execution, delivery and performance of this
Agreement by APL, the performance of this Agreement by APL and the consummation
of the transactions contemplated hereby, other than (a) the filing of
notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
("HSR Act") and the expiration or early termination of the waiting period
thereunder, (b) the approval of the transactions contemplated hereby by the
shareholders of Neptune Orient Lines Limited, a Singapore corporation("NOL"),
pursuant to an extraordinary general meeting and (c) any consents, the failure
to obtain would not prohibit the consummation of any of the transactions
contemplated hereby or give rise to any material claim against the Company.
II.4 Organization and Authority of the Company. The Company is a
-----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Tennessee and has the requisite corporate power and authority to
carry on its business as presently conducted and to consummate the transactions
contemplated hereby. The Company is qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary. Schedule 2.4 correctly lists the current
directors and executive officers of the Company. True, correct and complete
copies of the respective charter documents of the Company as in effect on the
date hereof have been made available to the Purchaser. The Company has no
subsidiaries. The Company is not in default or violation (and no event has
occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of its certificate of
incorporation or by-laws.
-6-
<PAGE>
II.5 Capitalization of the Company. The entire authorized capital
-----------------------------
stock of the Company consists of 2,000 shares of Common Stock, no par value, of
which 1,000 shares are issued and outstanding. All of the Stock has been duly
authorized and validly issued and is fully paid and nonassessable. There are no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter. There are no outstanding shares of capital stock of the Company or
existing options, warrants, calls, subscriptions, convertible securities or
other rights, agreements or commitments which obligate the Company to issue,
transfer or sell any shares of capital stock of the Company. All securities
issued by the Company have been issued in transactions exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act") and the
rules and regulations promulgated thereunder and all applicable state securities
or "blue sky" laws, and the Company has complied in all material respects with
the Securities Act and all applicable state securities or "blue sky" laws in
connection with the issuance of any such securities. APL has good and valid
title to all of the Stock, free and clear of all Liens and, subject to
applicable securities laws and competition laws, free of any restriction on its
right to transfer or exercise any voting or other right with respect thereto.
At the Closing, good and valid title to the Shares, free and clear of all Liens,
encumbrances, equities or claims shall be transferred to the Purchaser. Except
as contemplated by this Agreement, there are no contracts, commitments,
arrangements, understandings or restrictions to which the Company or to the
Knowledge of the Company any other Person is bound relating in any way to any
shares of capital stock or other securities of the Company.
II.6 Financial Statements. (a) APL has delivered to the Purchaser
--------------------
the audited consolidated balance sheets of the Company as of December 25, 1998
(the "Balance Sheet") and the audited consolidated statements of operations and
cash flows for fiscal 1996, 1997 and 1998 (together with the Balance Sheet, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with GAAP, consistently applied, and fairly and accurately present
the financial position of the Business as of the respective dates thereof and
the results of operations, changes in financial position and cash flow
-7-
<PAGE>
of the Business for the respective periods covered thereby. The Financial
Statements were prepared in accordance with the books of account and other
financial records of the Company and include all adjustments that are necessary
for a fair presentation of the consolidated financial condition of the Company
and the results of operations of the Company as of the dates thereof or for the
periods covered thereby. The Company's operating leases in the Financial
Statements have been appropriately classified as such pursuant to GAAP and
Statement of Financial Accounting Standards No. 13.
(b) The Company has no indebtedness for borrowed money
("Indebtedness") owed, as of the date of this Agreement, to any third party
(determined in accordance with GAAP).
(c) Schedule 2.6(c) sets forth a true, correct and complete summary
of all consolidated accounts payable, accrued expenses and accounts receivable
of the Company as of December 25, 1998 and February 5 and March 5, 1999, which
schedule shall set forth the name of the account debtor (in the case of accounts
receivable) or account creditor (in the case of accounts payable) and the amount
owed by or owing to such account debtor or account creditor (identifying the
portion of accounts receivables that are current, 30, 60, 90 and more than 90
days past due).
(d) The consolidated balance sheet of NOL as of June 30, 1998(the
"NOL Balance Sheet") was prepared in accordance with Singapore generally
accepted accounting principles and fairly and accurately presents the financial
position of NOL as of the date thereof. The NOL Balance Sheet was prepared in
accordance with the books of account and other financial records of NOL and
includes all adjustments that are necessary for a fair presentation of the
financial position of NOL as of the date thereof.
II.7 Books and Records. The books of account and other financial and
-----------------
corporate records of the Company have been maintained in all material respects
in accordance with good business and accounting practices consistently applied.
The minute books and stock transfer books of the Company are correct, complete
and current in all material respects. At the Closing, any documentary and stock
transfer tax stamps required in connection with the transfer of the Shares
pursuant to this Agreement will be duly affixed for transfer.
-8-
<PAGE>
II.8 Undisclosed Liabilities. The Company has no material
-----------------------
liabilities (whether known or unknown and whether absolute, accrued, fixed,
contingent or otherwise) except for (a) liabilities or obligations reflected or
reserved against on the Balance Sheet in accordance with GAAP, (b) liabilities
incurred in the ordinary course of business since the date of the Balance Sheet,
(c) liabilities set forth in Schedule 2.8 or any other Schedule or Exhibit
hereto and (d) liabilities as to which a separate representation is made in this
Agreement; provided that for purposes of this representation liabilities which
may be immaterial individually, but are material in the aggregate, shall be
deemed to be material. There are no loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) of or affecting the Company which are
not adequately provided for or disclosed on the Balance Sheet or in the notes
thereto, in each case, to the extent required by GAAP. The Company is not a
guarantor of or obligor on any material Liability of any other Person except as
set forth in any Schedule or Exhibit hereto.
II.9 Accounts and Notes Receivable. Except as set forth in Schedule
-----------------------------
2.9, all the accounts receivable and notes receivable owing to the Company as of
the date hereof constitute valid and enforceable claims arising from bona fide
transactions in the ordinary course of business. Except to the extent of the
reserves on the consolidated books of the Company or set forth in Schedule 2.9,
there are no known or asserted claims, refusals to pay or other rights of set-
off against any such accounts or notes receivable. Except as set forth in
Schedule 2.9, there is (i) no account debtor or note debtor that to the
Knowledge of the Company, has refused or threatened to refuse to pay its
currently outstanding obligations in excess of $25,000 to the Company for any
reason, or has otherwise made a claim of set-off or similar claim and (ii) to
the Knowledge of the Company (without investigation), no account debtor or note
debtor that owes the Company amounts in excess of $25,000 in the aggregate is a
debtor under applicable bankruptcy laws.
II.10 Absence of Certain Developments. Since the date of the Balance
-------------------------------
Sheet, except as set forth in Schedule 2.10 or as contemplated by this
Agreement, the Company has operated the Business in the ordinary course
consistent with past practice in all material respects and there has not
-9-
<PAGE>
been (a) any change or event involving the Company or any of its Affiliates that
has had or would reasonably be expected to have a Material Adverse Effect other
than changes relating to or arising from general economic, market or financial
conditions or generally affecting the industries, including the rail service
industry, or markets in which the Company operates, (b) any delivery of a notice
of non-renewal or any other failure to renew contracts or agreements which are
material to the Company, (c) through the date of this Agreement any loss of any
employee who earned more than $75,000 in the most recent fiscal year (in salary,
bonus and other case compensation), (d) any acquisition or disposition of assets
in a transaction or series of related transactions in excess of $100,000, other
than in the ordinary course of Business, (e) any action taken by the Company of
the type contemplated by Section 4.3(a)-(i), Section 4.3(k) (other than in
connection with the auction of the Company by Morgan Stanley & Co. Incorporated
prior to the date of this Agreement), and Section 4.3(l)-(s) hereof, (f) any
failure to take any action by the Company of the type contemplated by Section
4.2(j) hereof or (g) any loss, destruction or damage to any owned, leased or
licensed property of the Company, whether or not insured, that has had or would
reasonably be expected to have a Material Adverse Effect.
II.11 Customers. The relationships with the material customers of
---------
the Company are satisfactory working commercial relationships. Schedule 2.11
sets forth a list of the amount of volume and revenue attributable to the twenty
largest customers for fiscal 1997 and 1998.
-10-
<PAGE>
II.12 Title to Properties.
-------------------
(a) Personal Property. Except as disclosed in the Financial
-----------------
Statements, the Company has, or prior to the Closing will have, good and
marketable title to, or a valid leasehold interest in, all material personal
properties and assets (whether tangible or intangible) that it purports to own,
lease or license free and clear of all Liens other than (a) the lien of current
taxes not yet due and payable, (b) Permitted Liens or (c) such other Liens which
do not materially detract from the use of the property. Each lease with respect
to any material personal property leased by the Company is valid and binding on
the Company and in full force and effect, and no termination event or condition
or uncured material default on the part of the Company or, to the Knowledge of
the Company (without investigation), the lessor exists under any such lease.
(b) Real Property. The Company does not own any real property.
-------------
Schedule 2.12(b) lists all real properties currently leased or subleased by the
Company (collectively, the "Real Property"). The Company has a valid leasehold
interest in and quietly enjoys all Real Property shown as leased by it on
Schedule 2.12(b), free and clear of all Liens other than Permitted Liens. Each
lease of real property leased by the Company is valid and binding on the Company
and in full force and effect, and no termination event or condition or uncured
material default on the part of the Company or, to the Knowledge of the Company
(without investigation), the landlord exists under any lease of real property.
II.13 Assets. At the Closing, the assets owned, leased or licensed
------
by the Company or provided pursuant to an Exhibit to this Agreement together are
all those assets necessary for the continued conduct of the Business after the
Closing in the same manner as currently conducted. All assets of the Company
are reflected in the Financial Statements in accordance with GAAP. The property
and equipment reflected in the Financial Statements in the aggregate are well
maintained and in good operating condition, and are free from all structural
flaws and design and engineering deficiencies which would materially reduce the
useful life of such assets in the aggregate, except for reasonable wear and tear
and except for items which have been written down in the Financial Statements to
a realizable market value or for which depreciation has been
-11-
<PAGE>
taken or adequate reserves have been provided in the Financial Statements.
II.14 Contracts. Attached as Schedule 2.14(a) is a true and complete
---------
list of all of the following contracts and agreements to which the Company or
any of its respective properties is subject or by which any thereof is bound
(collectively the "Material Contracts")(a) contracts with any current officer,
director or Affiliate of the Company; (b) contracts for the sale of any of the
assets of the Company or for the grant to any person of any preferential rights
to purchase any of its assets other than in the ordinary course of business; (c)
contracts for the purchase of any of the assets or securities of another person
other than in the ordinary course of business; (d) contracts containing
covenants of the Company not to compete in any line of business or with any
person in any geographical area or, covenants of any other person not to compete
with the Company or in any line of business or in any geographical area; (e)
indentures, credit agreements, mortgages, promissory notes, and other contracts
relating to the borrowing of money; (f) contracts or obligations with all
employees, consultants and independent contractors that are material to the
Business; and (g) all other agreements, contracts or instruments which the
aggregate value of conditional or unperformed services as of the date hereof
exceeds $100,000 for any single contract or $1,000,000 in the aggregate for all
such contracts. Except as disclosed in Schedule 2.14(b), each Material Contract
is in full force and effect; and no breach or default or event which would (with
the passage of time, notice or both) constitute a breach or default or result in
the loss of any material benefit thereunder by the Company or, to the Knowledge
of APL or the Company (without investigation), any other party or obligor with
respect thereto, exists and is continuing which in each case would reasonably be
expected to materially impair the benefits expected to be derived therefrom.
II.15 Litigation. Except as disclosed in Schedule 2.15, as of the
----------
date of this Agreement, there is no written claim, filed complaint, arbitration,
action, suit, proceeding or, to the Knowledge of APL or the Company,
investigation pending or threatened, against or affecting (a) the Company or any
of its properties or (b) any officer, director or employee of the Company in
reference to actions taken by them in such capacities. Except for laws of
-12-
<PAGE>
general application or as disclosed in Schedule 2.15, the Company is not subject
to any outstanding subpoena that is material to the Business or any order,
injunction, judgment, decree, ruling, writ or arbitration award of any court or
Governmental Entity.
II.16 Compliance with Law; Permits. Except as set forth in Schedule
----------------------------
2.16, the Company is, and during the past two years has been, in material
compliance with all laws, regulations, orders, judgements and decrees of any
Governmental Entity which are applicable to the Company. The Company holds all
Permits that are required by any Governmental Entity to permit it to conduct the
Business as now conducted. Each Permit held by the Company is in full force and
effect, and the transactions contemplated herein (including but not limited to
the change of corporate name) will not affect the continuing validity of any
such Permit. To the Knowledge of APL or the Company (without investigation), no
suspension, cancellation or termination of any of such material Permits is
threatened or imminent. Schedule 2.16 contains a list of all of the Permits
which are material to the Company. Copies of such Permits have been provided to
Purchaser or its counsel or will be so provided upon request.
II.17 Employee Benefit Plans. (a) All benefit and compensation
----------------------
plans and contracts maintained by APL or the Company which cover current
employees of the Company (the "Employees"), including, but not limited to,
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and deferred
compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans, workers compensation benefits and employment
agreements (the "Benefit Plans"), are listed in Schedule 2.17(a). True and
complete copies of (i) all Benefit Plans and insurance contracts forming a part
of any Benefit Plans, and all amendments thereto (ii) the three most recent Form
5500 Annual Reports, including related schedules and audited financial
statements and opinions of independent certified public accountants, (iii) the
most recent tax qualification determination letter, if any, received from or
applications pending with the Internal Revenue Service, (iv) the most recent
actuarial report, if any and (v) the most recent nondiscrimination testing
results under Sections 401(a)(4), 401(k), 401(m) and 410(b)
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<PAGE>
of the Code have been provided or made available to Purchaser.
(b) All Benefit Plans, to the extent subject to ERISA, have at all
times been operated and administered in compliance in all material respects with
its terms, the applicable requirements of ERISA, the Code and other applicable
law. Each Plan which is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified
under Section 401(a) of the Code, has received a favorable determination letter
from the Internal Revenue Service with respect to "TRA" (as defined in Section 1
of Rev. Proc. 93-39), and to the Knowledge of APL and the Company there are no
circumstances likely to result in revocation of any such favorable determination
letter. There is no material pending or, to the Knowledge of APL or the Company
threatened, lawsuits, claims (other than routine claims for benefits),
investigations or audits relating to the Plans. The Company has not engaged in
a transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in
an amount which would be material.
(c) No liability, contingent or otherwise, under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by the Company with
respect to any ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(c)(15) of ERISA, currently or formerly maintained by any
of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate"). The Company has not maintained or contributed to at any
time during the five-year period preceding the date of this Agreement any
employee pension benefit plan which is a multi-employer plan, within the meaning
of Section 3(37) of ERISA, which is subject to Title IV of ERISA.
(d) Neither any Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver.
-14-
<PAGE>
(e) (i) All contributions or payments made or deemed to have been
made with respect to each Benefit Plan that is a deferred compensation plan,
including any pension plan, are presently, and have been during the years to
which they relate, fully deductible pursuant to Section 404 of the Code and are
not presently, and have never been during the years to which they relate,
subject to any material excise tax under Section 4972 of the Code, (ii) as of
the Effective Time, all payments of outstanding contributions, due on or prior
to that date, including minimum contributions, premiums, and funding obligations
imposed by the terms of a Benefit Plan or by any law or government agency,
(including under Part 3 of ERISA) shall have been made in all material respects
with respect to each Benefit Plan, (iii) all contributions to and payments with
respect to or under the Benefit Plans that are required to be made with respect
to periods ending on or before the Effective Time have been made or accrued
before the Effective Time by the Company in all material respects in accordance
with the appropriate plan documents, financial statement, actuarial report,
collective bargaining agreements or insurance contracts or arrangements, and
(iv) with respect to each Benefit Plan that is an "employee welfare benefit
plan" under Section 3(1) of ERISA (a "Welfare Plan") that is partially or fully
funded through a trust, all tax deductions claimed by the Company or any of its
Subsidiaries relating to any such trust are allowable, and all tax returns and
other governmental filings required to be filed with respect to any such trust,
whether by the Company or any of its Subsidiaries or the trust, have, to the
Knowledge of the Company, been made in a timely manner.
(f) Except as provided under Section 4.7 hereof, the consummation of
the transactions contemplated by this Agreement (either alone or together with
the occurrence of any related event such as termination of employment) will not
(i) entitle any employees of the Company to severance pay, (ii) accelerate the
time of payment or vesting or trigger any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the Benefit
Plans or (iii) result in any breach or violation of, or a default under, any of
the Benefit Plans.
(g) Except as set forth in Schedule 2.17(g), no Benefit Plan
providing medical or death benefits (whether or
-15-
<PAGE>
not insured) with respect to current or former employees of the Company
continues such coverage or provides such benefits beyond their date of
retirement or other termination of service (other than coverage mandated by
Section 601 of ERISA, the cost of which is fully paid by the former employee or
his or her dependents).
(h) No Parachute Payments. As a direct or indirect result of the
---------------------
Purchaser's purchase of the Stock, neither the Company nor the Purchaser will be
obligated to make a payment, or give a benefit or right, to an individual that
would be a "parachute payment" to a "disqualified individual" as those terms are
defined in Section 280G of the Code without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future.
II.18 Certain Interests. (a) No officer or director of APL or the
-----------------
Company is indebted or otherwise obligated to the Company, and the Company is
not indebted or otherwise obligated to any such officer or director, except for
amounts due under Benefit Plans or normal arrangements applicable to all
employees generally as to salary or reimbursement of ordinary business expenses.
(b) No director, officer or Affiliate of the Company owns any direct
or indirect interest of any kind in, or is a director, officer, employee,
partner, affiliate or associate of, or consultant or lender to, or borrower
from, or has the right to participate in the management, operations or profits
of, any person or entity (other than the Company or an entity which is a direct
or indirect subsidiary or parent of the Company) which is (i) a competitor,
customer, lessor, tenant, creditor or debtor of the Company, (ii) engaged in a
business directly and materially related to the business of the Company or (iii)
otherwise has a material financial interest in any transaction to which the
Company is a party, except for the ownership of less than 5% of the outstanding
capital stock of any publicly traded corporation.
II.19 Insurance. Schedule 2.19 contains in all material respects a
---------
complete and correct list of all effective insurance policies which cover the
Business, properties and assets of the Company and all premiums due thereon have
been paid. The insurance coverage provided by insurance policies listed in
Schedule 2.19 is adequate and
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<PAGE>
suitable for the Business of the Company. No notice of cancellation or non-
renewal has been received by the Company and the Company is not in default under
any such policy. The Financial Statements do not reflect any reserves for any
insurance programs.
II.20 Consequences of Stock Purchase. Neither any Person who now has
------------------------------
material business dealings with the Company nor any officer of the Company has
notified the Company or APL, and neither APL nor the Company has a reasonable
basis to believe, that any such Person would or might cease business dealings or
employment with the Company after the Closing.
II.21 Intercompany Transactions. All material transactions between
-------------------------
the Company and any Affiliate of the Company for fiscal 1996, 1997 and 1998 are
reflected in the Financial Statements. A list and brief description of the
material transactions between the Company and any Affiliate thereof transacted
during fiscal 1998 are set forth on Schedule 2.21 hereto. Except for
liabilities or obligations which are or were set forth in the Financial
Statements or this Agreement, incurred in the ordinary course of business since
the date of the Balance Sheet (and which are not, individually or in the
aggregate, material to the Company) or that are contemplated by, or will be
discharged or terminated pursuant to, this Agreement, there are no outstanding
liabilities or obligations for amounts owing to or from, or leases, contracts or
other commitments or arrangements between the Company and APL or any other
Affiliate of APL (other than the Company).
II.22 No Brokers or Finders. No agent, broker, finder, or investment
---------------------
or commercial banker (other than Morgan Stanley & Co. Incorporated, as to whose
fees and expenses APL has full responsibility and neither the Company nor the
Purchaser shall have any responsibility) or other Person or firm engaged by or
acting on behalf of APL or the Company or any of their respective Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
brokerage or finder's or similar fee or other commission as a result of this
Agreement or such transaction.
II.23 Environmental Matters. Except as disclosed on Schedule 2.23 or
---------------------
as to matters as to which none of APL or
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its Affiliates (including the Company) would be liable under applicable
Environmental Law:
(a) the Company complies and at all times has complied in all
material respects with all applicable Environmental Laws;
(b) the properties (including without limitation soils, groundwater,
surface water, buildings and other structures) currently owned, leased,
operated, managed or controlled by the Company are not contaminated with any
Hazardous Substance and do not contain any underground storage tanks;
(c) the properties formerly owned, leased, operated, managed or
controlled by the Company were not contaminated in any material respect with any
Hazardous Substance during such period of ownership, lease, operation,
management or control;
(d) the Company has not received any claim alleging liability and, to
the Knowledge of the Company (without investigation), is not subject to
liability, for any Hazardous Substance contamination at any location (including
without limitation any location to which any Hazardous Substance has been
generated, treated, stored or disposed by or on behalf of the Company);
(e) neither APL nor the Company has received any claim, notice,
demand letter or request for information alleging that the Company may be in
violation of, or liable under, any Environmental Law;
(f) the Company is not subject to any order, decree, injunction or
directive from any Governmental Entity, or to any indemnity or other agreement
with any third party, relating to liability under any Environmental Law or to
Hazardous Substances; and
(g) to the Knowledge of the Company (without investigation), there
are no other circumstances or conditions involving any of the Company or APL
that could reasonably be expected to result in any material claim, liability,
investigation, cost or loss to the Company or any material restriction on the
ownership, use or transfer of any property by the Company pursuant to any
Environmental Law.
-18-
<PAGE>
The parties agree that the property in Kearny, New Jersey subject to the
Lease Agreement between Consolidated Rail Corporation, as lessor, and American
President Intermodal Company, Ltd., shall be deemed to be a currently leased and
formerly leased facility only for purposes of Section 2.23(b) and (c) above.
II.24 Intellectual Property. (a) Except as set forth on Schedule
---------------------
2.24, (i) the Company is the sole owner, free of any lien or encumbrance, of, or
has a valid license or otherwise the right to use, and at Closing will have a
valid license or the right to use, without any obligation to make any royalty or
other fixed or contingent payments, or otherwise on commercially reasonable
terms, all U.S. and foreign patents, copyrights, Computer Software and
databases, trademarks, service marks, trade names, logos and trade dress,
whether or not registered, trade secrets, know-how, proprietary and intellectual
property rights and information, including, without limitation, all grants,
registrations and applications relating thereto (collectively, "Intellectual
Property Rights") used in the conduct of the Business as now conducted (such
Intellectual Property Rights owned by or licensed to the Company, or which the
Company has the right to use, collectively, the "Company Rights"), and shall
provide the Purchaser a list of such Company Rights prior to the Closing
Date;(ii) the Company's rights in the Company Rights are valid and enforceable;
(iii) the Company has received no written demand, claim, or notice from any
Person in respect of the Company Rights which challenges or threatens to
challenge the validity of, or the rights of the Company in, any such Company
Rights, and the Company knows of no valid basis for any such challenge; (iv) (A)
the Company is not in violation or infringement of, and (B) to the Knowledge of
the Company (without investigation) has not violated or infringed, any
Intellectual Property Rights of any other Person; (v) to the Knowledge of the
Company (without investigation), no Person is infringing any Company Rights; and
(vi) the Company has not granted any license with respect to any Company Rights
to any Person. The Computer Software owned by the Company or licensed or
otherwise made available to the Company through the Information Technology
Access and License Agreement (the "Included Software") comprises all the
Computer Software necessary for the conduct of the Business after the Closing in
the same manner as currently conducted.
-19-
<PAGE>
(b) Schedule 2.24 contains a complete and accurate list of material
Company Rights and all license and other agreements relating thereto (excluding
licenses for off-the-shelf software).
(c) For purposes hereof, "Computer Software" means all programs or
routines used to cause a computer to perform a task or a desired set of tasks,
the documentation required to describe and maintain these programs and all
related codes, including without limitation programs or routines for operating
systems and computer applications.
II.25 Year 2000 Compliance. The Computer Software included in the
--------------------
Included Software that was developed by APL or the Company and related hardware
are capable of providing, or are being adapted to provide pursuant to a Year
2000 ("Y2K") compliance program adopted and in the process of being implemented
by APL (the "Y2K Program"), in all material respects uninterrupted millennium
functionality to record, store, process and present calendar dates falling on or
after January 1, 2000 and date-dependent data in substantially the same manner
and with the same functionality as such software records, stores, processes and
presents such calendar dates and date-dependent data as of the date hereof
without error relating to date data and date-dependent data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century ("Y2K Compliant").
To the Knowledge of APL, the software and related hardware that are licensed by
APL or the Company from third parties and are material to the Business are Y2K
Compliant or are being adapted to become Y2K Compliant pursuant to the Y2K
Program. Prior to the date of this Agreement, APL has discussed with the
Purchaser and its advisors the material steps that it has taken to become Year
2000 compliant and the costs expected to incur in connection therewith. The Y2K
Program has been designed to render the Included Software in all material
respects Y2K Compliant. Between the date hereof and the Closing, APL and the
Company will use their commercial reasonable efforts, and following the Closing
APL will use its commercially reasonable efforts to implement the Y2K Program.
If the Y2K Program is implemented in accordance with its terms, Y2K compliance
will be in all material respects achieved prior to the year 2000.
-20-
<PAGE>
II.26 Disclosure. (a) The information regarding the Company
----------
contained in the Financial Statements and this Agreement, taken together, does
not contain any untrue statement of a material fact regarding the Company or
omit to state a material fact regarding the Company necessary in order to make
the statements and information contained therein, in light of the circumstances
under which they were made, not misleading.
II.27 Labor Relations. (a) There is no unfair labor practice, charge
---------------
or complaint or other proceeding pending or, to the Knowledge of APL threatened,
against the Company or directly affecting the Business before the National Labor
Relations Board or any other Governmental Entity; (b) there is no labor strike,
slowdown or stoppage pending or, to the Knowledge of APL, threatened, by the
employees of the Company against the Company or directly affecting the Business,
nor has there been any such activity within the past two years against the
Company or directly affecting the Business; (c) there are no pending collective
bargaining negotiations relating to the employees of the Company; and (d) (i)
there are no agreements with, or pending petitions for recognition of, a labor
union or association as the exclusive bargaining agent for any or all of the
employees of the Company, (ii) no such petitions have been pending within the
past five years and (iii) to the Knowledge of APL (without investigation), there
has not been any general solicitation of representation cards by any union
seeking to represent the employees of the Company as their exclusive bargaining
agent at any time within the past five years.
II.28 Working Capital; Net Fixed Assets. As of the date hereof and
---------------------------------
as of the Closing Date, the Company's Working Capital will not be less than
$(16,700,000) and the Company's Net Fixed Assets will not be less than
$95,000,000.
ARTICLE III
Representations and Warranties of the Purchaser
-----------------------------------------------
The Purchaser hereby represents and warrants to APL that:
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<PAGE>
III.1 Organization and Authority. The Purchaser is a limited
--------------------------
liability company duly organized, validly existing and in good standing under
the laws of Delaware. The Purchaser has full power and authority to execute,
deliver and perform this Agreement. The execution, delivery and performance by
the Purchaser of this Agreement and any Ancillary Agreement to which the
Purchaser is to be a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of the Purchaser. This Agreement constitutes a valid and, assuming due
execution by APL, binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and to general equitable principles. Upon execution and
delivery of the Ancillary Agreements to which the Purchaser is to be a party by
the parties thereto, such Ancillary Agreements will constitute valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally, and to general equitable principles.
III.2 Noncontravention. The execution, delivery and performance of
----------------
this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby will not violate or conflict with, or constitute a breach or
default (with or without notice or lapse of time, or both) under (a) the charter
documents of the Purchaser, (b) any law, regulation, order, judgment, or decree
applicable to the Purchaser or (c) any term, condition or provision of any loan
or credit agreement, note, bond, mortgage, indenture, lease, sublease or other
material agreement, commitment, instrument, permit, concession, franchise or
license to which the Purchaser is a party or by which the Purchaser or its
assets may be bound, in each case in clauses (b) or (c) above, which conflict or
violation would reasonably be expected to prevent or delay the consummation of
the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
III.3 No Governmental Consent or Approval Required. No
--------------------------------------------
authorization, consent, Permit, approval or other order of, declaration to, or
registration, qualification, designation or filing with, any Governmental
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<PAGE>
Entity or any other Person is required for or in connection with the execution,
delivery and performance of this Agreement by the Purchaser and the consummation
of the transactions contemplated hereby, other than (a) the filing of
notification under the HSR Act and the expiration or early termination of the
waiting period thereunder and (b) any consents, the failure to obtain would not
prohibit the consummation of the transactions contemplated hereby.
III.4 Financial Capability. The Purchaser has delivered to APL
--------------------
complete and correct executed copies of letters with respect to the debt
financing (the "Financing Letters") required for the consummation of the
transactions contemplated hereby, which are attached as Exhibits H-1 and H-2
hereto. The Financing Letters are in full force and effect and constitute the
only understanding of the lenders and the Purchaser with respect to the lenders'
obligations to fund such debt financing. Assuming satisfaction of all
applicable conditions hereunder and as set forth in the term sheets and the
commitment letter which constitutes the Financing Letters and full funding
thereunder, such financing, together with the other funds available to the
Purchaser, will provide sufficient funds to consummate the transactions
contemplated hereby.
III.5 Purchase for Investment. The Purchaser is purchasing the Stock
-----------------------
for investment for its own account and not with a view to, or for sale in
connection with, the distribution thereof. The Purchaser acknowledges that the
Stock is not registered under the United States Securities Act of 1933, as
amended, any applicable state securities laws or any applicable foreign
securities laws, and that the Stock may not be transferred or sold except
pursuant to the registration provisions of the United States Securities Act of
1933, as amended, or applicable foreign securities laws or pursuant to an
applicable exemption therefrom and pursuant to state securities laws as
applicable.
III.6 Pacer Acquisition. The Agreement and Plan of Merger, dated
-----------------
February 22, 1999, by and among Mile High Acquisition Corp. ("Mile High"), Pacer
International, Inc. ("Pacer") and stockholders of Pacer (the "Pacer Merger
Agreement"), has been duly authorized, executed and delivered by Mile High and
is enforceable against Mile High in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights and to general
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<PAGE>
equitable principles. No Affiliate of Apollo Management, L.P. other than Mile
High is an obligor under the Pacer Merger Agreement. Mile High is not in breach
of its obligations under the Pacer Merger Agreement and, to the Knowledge of the
Purchaser (without investigation), no other party is in breach of its
obligations under the Pacer Merger Agreement. The Purchaser intends to close the
transactions contemplated by the Pacer Merger Agreement (the "Pacer
Transaction") immediately following the closing of the transaction contemplated
by this Agreement.
III.7 Capitalization of the Company. Immediately following the
-----------------------------
closing of the transaction contemplated by this Agreement (but not the Pacer
Transaction), the ownership of the shares of the Purchaser and APL in the
Company will be based on the amount invested or retained by each such party in
the Company, and the value of each share issued or retained by each shall be the
same for purposes of such calculation. Immediately following the closing of the
Pacer Transaction, the Company will own all the outstanding common stock of
Pacer. Except as set forth in the shareholders agreement referred to in the
Pacer Merger Agreement, financing documents relating to the transactions
contemplated hereby, Company stock option plans and the charter and bylaws of
the Company (a copy of each of which has been delivered to APL on or before the
date of this Agreement), or as otherwise contemplated by this Agreement, as of
the Closing Date there will be no contracts, commitments, arrangements,
understandings or restrictions to which the Company or any other Person will be
bound relating in any way to the shares of capital stock or other securities of
the Company.
ARTICLE IV
Covenants
---------
IV.1 Cooperation and Access. (i) From and after the date hereof,
----------------------
upon reasonable advance notice, APL shall cause the Company to permit the
Purchaser and its attorneys, consultants, lenders, equity investors (other than
an APL Competitor as defined in the Stacktrain Services Agreement), accountants
and other representatives to access, during regular business hours, the assets,
employees, books, contracts, commitments, personnel, lenders and advisors
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<PAGE>
(including, without limitation, Tax Returns filed and those in preparation,
workpapers and other items relating to Taxes) of the Company and shall furnish,
or cause to be furnished, to the Purchaser and its representatives such
financial, tax and operating data and other available information with respect
to the Business as the Purchaser shall from time to time reasonably request;
provided, however, that no such access shall be undertaken in such a manner as
- -------- -------
would reasonably be expected to interfere with in any material respect with the
Company and its operation of the Business; provided further that all information
-------- -------
received by the Purchaser and given by or on behalf of the Company in connection
with this Agreement and the transactions contemplated hereby shall be held by
the Purchaser and its Affiliates, agents and representatives confidential
pursuant to the terms of the Confidentiality Agreement. Such investigation as
provided for in this Section 4.1 shall include, among other things, the receipt
of relevant financial information, the review of any relevant contractual
obligations of the Company, the conducting of discussions with the Company's
management and, with the Company's prior consent (such consent not to be
unreasonably withheld or delayed), other employees and customers of the Company,
environmental review (including, if reasonably necessary, environmental
testing), review and valuation of all pension, health, retiree or other ERISA
related liabilities and such other investigations and valuations as may be
deemed reasonably necessary by the Purchaser. The cost of any such
investigation shall be borne by the Purchaser and no such investigation shall be
undertaken in a manner as would reasonably be expected to interfere in any
material respect with the timing of the transactions contemplated by this
Agreement.
IV.2 No Solicitation. From the date hereof and through the Closing
---------------
(the "Nonsolicitation Period"), each of the Company and APL shall, and shall
cause their respective representatives, affiliates, agents, financial advisors
and employees (collectively, "Representatives") to, refrain from soliciting,
discussing, providing information to or negotiating, directly or indirectly,
with any third party (other than Purchaser and its Representatives) any
inquiries, proposals or offers with respect to the sale of the Common Stock or
any portion of the Company's assets or securities (an "Acquisition Proposal")
(other than sales and other dispositions of assets in the ordinary course of
business which are not material to the Business); provided,
--------
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<PAGE>
however, that, subject to the provisions of Section 7.2, at any time prior to
- -------
the earlier of (i) April 30, 1999 and (ii) the time the shareholders of NOL
shall have voted to approve this Agreement, if NOL or APL shall receive from any
third party an unsolicited Acquisition Proposal and determines in good faith
upon the advice of its financial advisors that such unsolicited Acquisition
Proposal is superior in its terms to the terms contemplated hereunder, NOL or
APL may, and may authorize and permit its Representatives to, provide third
parties with nonpublic information, otherwise facilitate any effort or attempt
by any third party to implement such Acquisition Proposal, recommend or endorse
such Acquisition Proposal with or by any third party, and participate in
discussions and negotiations with any third party relating to such Acquisition
Proposal. NOL or APL shall promptly advise the Purchaser following the receipt
by NOL or APL of any Acquisition Proposal and the substance thereof (including
the identity of the person making such Acquisition Proposal), and advise the
Purchaser of any developments with respect to such Acquisition Proposal promptly
upon the occurrence thereof.
IV.3 Conduct of Business Prior to the Closing. From the date hereof
----------------------------------------
until the Closing, except as contemplated by this Agreement or the Purchaser
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed, APL agrees that it shall cause the Company, subject to the
provisions of this Section 4.3, to conduct the Business in the ordinary and
usual course consistent with past practice, and use its commercially reasonable
efforts to preserve intact the Business and related relationships with
customers, rail carriers and other third parties and keep available the services
of its officers and employees. From the date hereof until the Closing, except
as contemplated by this Agreement or as the Purchaser shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed, NOL and
APL agree that they:
(a) shall not permit the Company to issue or transfer any capital
stock of the Company or any security convertible into or exchangeable for
any such capital stock or any right to acquire any such capital stock or
pledge or hypothecate shares of capital stock of the Company to secure
existing credit facilities;
-26-
<PAGE>
(b) shall not permit the Company to make any change in its
certificate of incorporation or bylaws;
(c) shall not permit the Company to incur or assume any indebtedness
for borrowed money or guarantee any such indebtedness other than in the
ordinary course of business consistent with past practice;
(d) shall not permit the Company to liquidate, dissolve or otherwise
reorganize or seek protection from creditors;
(e) shall not permit the Company to adopt or amend in any material
respect any Benefit Plan including, without limitation, any employment,
severance, retention or similar agreements or arrangements;
(f) shall not permit the Company to grant, confer or award any
options, warrants, conversion rights or other rights, not existing on the
date hereof, to acquire any shares of its capital stock or other securities
of the Company or accelerate, amend or change the period of exercisability
of options or restricted stock granted under any employee stock plan or
authorize cash payments in exchange for any options granted under any of
such plans;
(g) shall not permit the Company to increase or agree to increase the
compensation payable or to become payable, other than increases in
accordance with past practice which are not material, to any of its
officers or employees or enter into any collective bargaining agreement;
(h) shall not permit the Company to (i) enter into any lease for real
property, except renewals of existing leases in the ordinary course of
business or (ii) enter into any operating lease without the prior written
consent of the Purchaser, unless the annual payments under such lease and
all other operating leases entered into by the Company since the date of
the Agreement, in the aggregate, does not result in a net increase in
payments under operating leases which exceeds $1 million per year;
-27-
<PAGE>
(i) shall not permit the Company to enter into any contract or
agreement or engage in any other type of transaction with APL or any of its
Affiliates (other than the Company) other than in the ordinary course of
business consistent with past practice or enter into any contract or
agreement that provides for payments that exceed $10 million per year;
(j) shall cause the Company to promptly notify the Purchaser of (i)
any material adverse change in its condition (financial or otherwise),
business, prospects, properties, assets, liabilities or the normal course
of its business or of its properties, (ii) any material litigation or
material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or (iii) the
breach of any representation or warranty contained herein;
(k) shall not permit the Company to authorize, propose or announce an
intention to authorize or propose, or enter into an agreement with respect
to, any merger, consolidation or business combination (other than the
transactions contemplated in this Agreement), release or relinquishment of
any material contract rights, or any acquisition or disposition of assets
or securities other than in the ordinary course of business consistent with
past practice;
(l) shall not make with respect to the Company or permit the Company
to (i) make, change or revoke any material Tax election other than the
Section 338 Election, (ii) settle or compromise any dispute involving a
material Tax liability or (iii) change any material practice with respect
to Taxes;
(m) shall not permit the Company to (i) directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock, or
make any commitment for any such action or (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock;
(n) shall not permit the Company to make or agree to make any capital
expenditure or expenditures with respect to property, plant or equipment
which,
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individually or in a series of related transactions, is in excess of
$100,000 or, in the aggregate, are in excess of $500,000 except as
otherwise in the ordinary course of business consistent with past practice
or in order to satisfy contractual commitments to customers;
(o) shall not permit the Company to change any significant accounting
principles or practices;
(p) shall not permit the Company to enter into any agreements
containing restrictive covenants that prohibit or materially limit the
Business (including, but not limited to, any covenant not to compete, which
shall be deemed to materially limit the Business) that would survive the
Closing other than as contemplated by this Agreement;
(q) shall not permit the Company to pay, discharge, settle or satisfy
any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business or in
accordance with their terms, of liabilities reflected or reserved against
in the Financial Statements or incurred thereafter in the ordinary course
of business, or waive any material benefits of, or agree to modify in any
material respect, any confidentiality, standstill, nonsolicitation or
similar agreement to which the Company is a party;
(r) shall not permit the Company to take, or agree (in writing or
otherwise) or resolve to take any action reasonably likely to result in a
Material Adverse Effect; or
(s) agree or commit itself (in writing or otherwise) or resolve to
take any of the foregoing actions.
Notwithstanding the foregoing, prior to Closing, APL shall be entitled, except
as may be required to meet the conditions at Closing set forth in Section 6.1,
to eliminate all intercompany loans, advances and other extensions of credit
between the Company, on the one hand, and APL or an Affiliate of APL (other than
the Company), on the other
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hand, and transfer all cash and cash equivalents of the Company to APL.
IV.4 Commercially Reasonable Efforts; Government Approvals.
-----------------------------------------------------
(a) Upon the terms and subject to the conditions herein provided,
each of the parties hereto agrees to use its commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary for it to do to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) to comply
promptly with all legal requirements which may be imposed on it with respect to
this Agreement and the transactions contemplated hereby (which actions shall
include, without limitation, furnishing all information required by applicable
laws and regulations in connection with approvals of or filings with any
Governmental Entity), (ii) to satisfy the conditions precedent to the
obligations of the parties hereto (including using its best reasonable efforts
to satisfy the conditions set forth in Sections 6.1(k) by April 30, 1998 and
6.1(l) by Closing) and (iii) (to use its best efforts, in the case of APL) to
obtain any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity or other public or private third party required to be
obtained or made by the Purchaser, APL or the Company in connection with the
acquisition of the Shares or the taking of any action contemplated by this
Agreement. In addition, following the Closing APL will ensure that LTS shall
have access to the 48' expandible APL Chassis provided for in the Equipment
Supply Agreement upon termination of the Stacktrain Services Agreement.
(b) Subject to appropriate confidentiality protections, each of the
parties hereto shall furnish to the other party such necessary information and
reasonable assistance as such other party may reasonably request in connection
with the foregoing and shall provide the other party with copies of all filings
made by such party with any Governmental Entity and, upon request, any other
information supplied by such party to a Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
(c) Without limiting the generality of the foregoing, the Purchaser
and APL agree to take or cause to
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be taken the following actions: (i) provide promptly to Governmental Entities
with regulatory jurisdiction over enforcement of any applicable Competition Laws
("Governmental Antitrust Entity") information and documents requested by any
Governmental Antitrust Entity or necessary, proper or advisable to permit
consummation of the acquisition of the Stock and the transactions contemplated
by this Agreement and (ii) without in any way limiting the other provisions of
this Section 4.4, file any notification and report form and related material
required under the HSR Act as soon as practicable and in any event not later
than 10 Business Days after the date hereof, and thereafter use its reasonable
best efforts to certify as soon as practicable its substantial compliance with
any requests for additional information or documentary material that may be made
under the HSR Act. Each party hereto shall provide to the other copies of all
correspondence between it (or its advisor) and any Governmental Antitrust Entity
relating to the acquisition of the Stock or any matters described in this
Section 4.4. Each party hereto agrees that the other party shall have the right
to participate in any meeting between the first party and any Governmental
Antitrust Entity relating to the acquisition of the Stock or any matters
described in this Section 4.4.
IV.5 Use of APL Name and Trademark. The Purchaser acknowledges and
-----------------------------
agrees that APL intends to cause the Company to change the corporate name of the
Company to eliminate the name "APL" prior to the Closing. Purchaser agrees
that, after the Closing, it will cause the Company to cease all use of the name
"APL" and the corporate "eagle" logo, a representation of which is attached
hereto as Schedule 4.5 (the "Logo"); provided, however, following the Closing,
-------- -------
the Company (i) shall have the right to continue to use the name of "APL" and
the Logo as affixed to products, labeling, packaging materials, Company
stationary, business forms or promotional materials as of the Closing Date until
the depletion of existing inventories but in no event after December 31, 1999
and (ii) shall not be obligated to eliminate the name "APL" or the Logo as
affixed to railcars, containers and chassis as of the Closing until such time as
the Purchaser shall decide to undertake the repainting, sale or decommissioning
of such assets. APL hereby grants the Company a non-exclusive license to use
the name "APL" and the Logo solely for the foregoing purposes and limited time
periods.
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IV.6 Confidentiality. Each party hereto, at all times prior to the
---------------
Closing and after any termination of this Agreement, will hold all confidential
information provided to such party by or on behalf of the other party hereto in
confidence pursuant to the terms of the Confidentiality Agreement. Upon any
termination of this Agreement, each party hereto will promptly return to the
other party such information provided to the first party, including any copies
of such information. Each party hereto acknowledges that the other party would
be irreparably harmed by a breach of this Section 4.6 and that there would be no
adequate remedy at law or in damages to compensate the other party for any such
breach and agrees that, in addition to any other remedy, the other party shall
be entitled to one or more injunctions requiring specific performance by the
first party of this Section 4.6, and the first party consents to the entry
thereof.
IV.7 Employee Benefits; Employees. (a) Each employee benefit plan
----------------------------
provided to employees of the Company after the Closing shall give full credit
for each participant's period of service with the Company or its Affiliates
prior to the Closing for purposes of determining eligibility and vesting of
benefits, but not accrual or amount of benefits, to the same extent such service
was credited for comparable purposes under the Company's Benefit Plans prior to
the Closing. Effective as of the Closing, APL shall take all actions necessary
to cause Employees to become fully vested in their accrued benefits under each
Pension Plan. Each employee welfare benefit plan provided to the employees of
the Company from and after the Closing shall (i) give full credit for
copayments, deductibles and out-of-pocket expenses under the Company's Benefit
Plans with respect to the current plan year toward any deductibles for the
remainder of the plan year during which the Closing occurs, and (ii) waive any
pre-existing condition limitation for any employee covered under a Welfare Plan
immediately prior to the Closing, unless such pre-existing condition was not
covered under the applicable Welfare Plan. APL shall cause each Welfare Plan to
remain solely responsible and to satisfy all liabilities for all claims incurred
by Employees under such Welfare Plans prior to the Closing.
(b) As of the Closing, the Employees of the Company shall be those
persons listed on Schedule 4.7(b) hereto (unless an Employee voluntarily
terminates his or her employment), as such Schedule may be amended prior to
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Closing by mutual agreement of the parties hereto. Following the Closing, APL
shall be solely liable for, and shall indemnify Purchaser and the Company
against (i) any obligations to former employees of the Company or current or
former employees of APL (who have performed services for the Company) in respect
of their employment or termination of employment including, without limitation,
obligations for severance or termination pay, COBRA benefits, workers
compensation benefits and other Benefit Plan obligations and (ii) any
obligations to Employees of the Company under any Benefit Plan, none of which
will be assumed or continued by the Company or Purchaser following the Closing.
IV.8 Insurance.
---------
(a) APL shall use commercially reasonable efforts to ensure that any
insurance coverage for any claims that arise out of or are related to
occurrences prior to the Closing relating to the Company or the Business will
continue with respect to such occurrences following the Closing, and APL agrees
to pay promptly to the Company insurance proceeds (net of any expenses of APL
incurred in defense of such claim) resulting from such coverage promptly after
receipt thereof ("Insurance Proceeds"). The amount of Insurance Proceeds
payable to the Company shall also include the amount of any deductible withheld
from any such insurance proceeds. From and after the date hereof, APL shall
diligently pursue for the benefit of the Purchaser, consistent with its past
practice, insurance coverage for any claims filed with third party insurers
prior to the Closing relating to the Company or the Business for periods on or
prior to the Closing. Following the Closing, the Company shall be responsible
for the control of all claims filed with third party insurers, subject to the
control exercised by any insurers in accordance with the applicable insurance
policies. APL shall also pay the Company for any uninsured cargo claims that
arise out of or are related to occurrences prior to the Closing to the extent
such claims are not recovered from a rail carrier.
(b) Except as provided in Section 4.8(a), as of the Closing, the
coverage under all insurance policies related to the Company shall continue in
force only for the benefit of APL and its Affiliates and not for the benefit of
the Purchaser. Purchaser agrees to use commercially reasonable efforts to
arrange for its own insurance policies with respect to the Company. Purchaser
also agrees not to
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seek, through any means, to benefit from APL's or its Affiliates' insurance
policies which may provide coverage for claims relating in any way to the
Company on or prior to the Closing, except as provided in Section 4.8(a).
IV.9 Warn Act. The Purchaser shall comply with The Worker
--------
Adjustment Retraining Notification Act (the "Warn Act") and shall indemnify APL
against liability thereunder with respect to Employees whose employment with the
Company is terminated following the Closing.
IV.10 Other Actions. Prior to the Closing, APL, the Company and the
-------------
Purchaser shall not take or omit to take any action, the taking or omission of
which would reasonably be expected to result in any of the representations and
warranties of such party set forth in this Agreement becoming materially untrue
or inaccurate.
IV.11 Advice of Changes. Prior to the Closing, APL and the Purchaser
-----------------
shall confer on a regular and frequent basis with respect to matters
contemplated hereby as reasonably requested by APL or the Purchaser. In that
regard, APL shall report on operational matters and promptly advise the
Purchaser and, if requested by the Purchaser in writing, of any material change
with respect to the Company, and the Purchaser, if requested by APL in writing,
shall report on the status of the debt financing contemplated by the Financing
Letters and the closing of the Pacer Transaction.
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IV.12 Financial Information. Prior to the Closing, APL shall furnish
---------------------
to the Purchaser (i) as soon as available but in any event within 15 days of
each four week accounting period, the unaudited consolidated balance sheets and
income statements of the Company (prepared in accordance with GAAP consistently
applied), showing the Company's financial condition as of the close of such
period and the results of operations during such period and for the then elapsed
portion of the Company's fiscal year, in each case setting forth the comparative
figures for the fiscal 1999 budget, (ii) as soon as available, but in any event
within 30 days of the end of the first and second fiscal quarters of fiscal
1999, the unaudited consolidated balance sheets and income statements of the
Company (prepared in accordance with GAAP consistently applied), showing the
Company's financial condition as of the end of such fiscal quarter and the
results of such operations during such quarter and for the then elapsed portion
of the Company's fiscal year, setting forth the corresponding figures for the
corresponding quarter in the prior fiscal year and the corresponding elapsed
portion of the prior fiscal year and (iii) such other financial information as
is reasonably requested by the Purchaser that is readily accessible from the
Company's accounting records and does not impose any undue burden or cost to
prepare.
IV.13 Accounts Payable, Accrued Expenses and Accounts Receivable. At
----------------------------------------------------------
least two business days prior to the Closing, APL shall provide a true, correct
and complete listing of all consolidated accounts payable, accrued expenses and
accounts receivable of the Company as of the most reasonably practicable recent
date, which schedule shall set forth the name of the account debtor (in the case
of accounts receivable) or account creditor (in the case of accounts payable)
and the amount owed by or owing to such account debtor or account creditor
(identifying the portion of accounts receivable that is current, 30, 60, 90 and
more than 90 days past due).
IV.14 Pacer Indemnification. The Purchaser shall cause the
---------------------
stockholders of Pacer (rather than the Purchaser itself) to pay promptly to APL
a percentage (equal to the relative equity interests of APL and the Purchaser in
the Company immediately following the closing of the transaction contemplated by
this Agreement) of any amounts (if any) to which the Purchaser or any of its
Affiliates are entitled and are to be paid directly from such stockholders
pursuant
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to the Pacer Merger Agreement, whether pursuant to the indemnification
provisions thereof or otherwise, following the closing of the Pacer Transaction.
IV.15 Conduct of Business Following the Closing. From the date of
-----------------------------------------
the Closing until the end of fiscal 1999, except as APL shall otherwise consent
in writing, which consent shall not be unreasonably withheld or delayed, the
Purchaser agrees that the Company shall conduct the Business in good faith
taking into account the conduct of the Business prior to Closing and the desire
of both parties to achieve the EBITDA Target and shall not permit the Company to
enter into any contract or agreement or engage in any other type of transaction
with Pacer, Apollo Management, L.P. ("Apollo") or any of their Affiliates other
than (i) on an arms' length basis or (ii) management fees and expense
reimbursements payable to Apollo.
ARTICLE V
Tax Matters
-----------
V.1 Definitions. For purposes of this Agreement, "Taxes" shall mean
-----------
all federal, state, local and foreign taxes, including without limitation,
income, property, sales and use, excise, withholding, franchise, environmental,
transfer, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, severance or similar taxes imposed on the
income, properties or operations of the Purchased Entity or the Seller's Group,
together with any penalties, additions or interest relating thereto and any
interest in respect of such additions or penalties. For purposes of this
Agreement, "Taxes" also includes any obligations under any agreements or
arrangements with any person with respect to the liability for, or sharing of,
Taxes (including, without limitation, pursuant to Treas. Reg. (S) 1.1502-6 or
comparable provisions of state, local or foreign Tax law) and including, without
limitation, any liability for Taxes as a transferee or successor, by contract or
otherwise. "Taxable Period" means any taxable year or any other period that is
treated as a taxable year (or other period, or portion thereof, in the case of a
Tax imposed with respect to such period or portion thereof, e.g., a quarter or a
portion of a Taxable Period, in the case of a Taxable Period that begins before
and ends after the Closing) with respect to which any Tax may be
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imposed under any applicable statute, rule or regulation. "Tax Reserve" shall
have the meaning set forth in Section 5.2(d). "Tax Return" shall mean all
reports, returns and other forms and documents (including, without limitation,
all schedules, exhibits and other attachments thereto) filed or required to be
filed with respect to Taxes including, without limitation, combined or
consolidated returns for any group of the Seller's Group.
V.2 Tax-Related Representations and Warranties.
------------------------------------------
(a) Tax Allocation Agreements. APL represents and warrants to the
-------------------------
Purchaser that the Purchased Entity neither is a party to nor has any liability
under any agreement, contract or understanding relating to any sharing by the
Purchased Entity of any Tax liability of any Person.
(b) Tax Returns and Reports. APL represents and warrants to the
-----------------------
Purchaser that except as set forth in Schedule 5.2(b), (i) all material Tax
Returns that are required to be filed by or with respect to the Company or any
member of the Seller's Group have been or will be duly and timely filed, (ii)
all Taxes shown to be due on the Tax Returns referred to in clause (i) have been
or will be timely paid in full, (iii) all deficiencies asserted or assessments
made as a result of any tax examinations have been settled or paid in full, (iv)
no issues that have been raised in writing by the relevant taxing authority in
connection with the examination of any of the Tax Returns referred to in clause
(i) are currently pending, (v) no waivers of statutes of limitation have been
given by or requested with respect to any Taxes or Tax Returns of the Company or
any member of the Seller's Group, and (vi) no extension of time with respect to
any date on which a Tax Return was or is to be filed is in force. Schedule
5.2(b) lists the date or dates through which the Internal Revenue Service have
examined the United States federal income tax returns. All material Tax Returns
referred to in clause (i) were prepared in the manner required by applicable
law, are true, correct, and complete in all material respects, and accurately
reflect the liability for Taxes of the Company and each of its Affiliates. True
and complete copies of all federal, state, local and foreign Tax Returns of the
Company or any member of the Seller's Group have been provided to the Purchaser
prior to the date hereof.
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<PAGE>
(c) No FIRPTA Withholding. APL represents and warrants to the
---------------------
Purchaser that no tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfer contemplated by this Agreement.
(d) Payment of Taxes. The Company and each member of the Seller's
----------------
Group have paid, or caused to be paid, all material Taxes due, whether or not
shown (or required to be shown) on a Tax Return, and have provided a sufficient
reserve for the payment of all Taxes not yet due and payable (without regard to
deferred Tax assets and liabilities) (the "Tax Reserve") on the Balance Sheet.
(e) Claims by Certain Jurisdictions and Liens on Assets. No
---------------------------------------------------
material claim has ever been made by any taxing authority with respect to the
Company or any member of the Seller's Group in a jurisdiction where the Company
or such member does not file Tax Returns that the Company or such member is or
may be subject to taxation by that jurisdiction. There are no security interests
on any of the assets of the Company that arose in connection with any failure
(or alleged failure) to pay any Taxes and, except for liens for real and
personal property Taxes that are not yet due and payable, there are no liens for
any Tax upon any asset of the Company.
(f) Affiliated Group. Neither the Company nor any of member of the
----------------
Seller's Group has been a member of an (i) affiliated group (within the meaning
of Section 1504 of the Code) or (ii) affiliated, combined, consolidated,
unitary, or similar group for state, local or foreign Tax purposes, other than
the group of which APL is the common parent, which affiliated group within the
meaning of Section 1504(a) of the Code includes the Company.
(g) Section 338(h)(10) Election. APL represents and warrants that
---------------------------
if the acquisition of the Shares is consummated pursuant to this Agreement, APL
will be eligible to join with the Purchaser in making an election under Section
338(h)(10) of the Code with respect to such acquisition of the Shares.
(h) Withholding and Backup Withholding Taxes. The Company and each
----------------------------------------
member of the Seller's Group have complied in all material respects with the
provisions of the Code relating to the withholding and payment of Taxes,
including, without limitation, the withholding and reporting
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requirements under Sections 1441 through 1464, 3401 through 3406, and 6041
through 6049 of the Code, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required.
(i) Adjustments to Income. Neither the Company nor any member of
---------------------
the Seller's Group has agreed to include, or is required to include, in income
any adjustment under either Section 481(a) or Section 482 of the Code (or an
analogous provision of state, local, or foreign law) by reason of a change in
accounting method or otherwise.
(j) Spin-Offs. Neither the Company nor any member of the Seller's
---------
Group has distributed the stock of any corporation in a transaction satisfying
the requirements of Section 355 of the Code since April 16, 1997.
(k) Options Treated as Stock. There are no outstanding options,
------------------------
warrants, instruments, contracts or other rights that might be treated for U.S.
federal income tax purposes as stock or another equity interest in the Company
or any member of the Seller's Group.
(l0 Partnership Interests. The Company is not a party to any joint
---------------------
venture, partnership or other arrangement or contract that could be treated as a
partnership for U.S. federal income tax purposes.
V.3 Liability for Taxes and Related Matters.
---------------------------------------
(a) Liability of APL for Taxes. APL shall indemnify, defend and
--------------------------
hold harmless the Purchaser, the Company and their respective officers,
directors, employees, Affiliates and agents (each, a "Tax Indemnitee") from and
against, and shall reimburse each Tax Indemnitee for, any and all Taxes
(including, without limitation, the reasonable expenses of investigation and
reasonable attorney's and accountant's fees and expenses in connection with any
action, suit or proceeding) actually incurred or suffered at any time by any Tax
Indemnitee arising out of or attributable to (i) any misrepresentation,
inaccuracy or breach of any representation, warranty, covenant, agreement or
promise related to Taxes by APL and/or the Company contained in this Agreement
(or in any certificate, document, list or schedule delivered to the Purchaser in
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connection with this Agreement by APL or the Company), (ii) any and all Taxes
for any Taxable Period ending on or before the Closing, (iii) any and all Taxes,
whether determined on a separate, consolidated, combined, group or unitary
basis, including any penalties and interest in respect thereof, of the Company
or any member of the Seller's Group (A) pursuant to Treas. Reg. (S) 1.1502-6 or
any comparable provision of state, local, or foreign law with respect to any
Taxable Period beginning on or before the Closing or (B) pursuant to any
guaranty, indemnification, Tax sharing, or similar agreement made on or before
the Closing relating to the sharing of liability for, or payment of, Taxes or
(iv) any and all Taxes resulting from the Section 338 Election.
(b) Liability of Purchaser for Taxes. The Purchaser shall be liable
--------------------------------
for and shall indemnify APL for the Taxes of the Purchased Entity for (i) any
Taxable Period that begins after the Closing and, (ii) with respect to any
Taxable Period beginning before and ending after the Closing, the portion of
such Taxable Period beginning after the Closing (other than Taxes arising under
Treas. Reg (S) 1.1502-6 (or a similar provision of state or local law) with
respect to the Seller's Group). The Purchaser shall be entitled to any refund of
Taxes of the Purchased Entity received for such periods.
(c) Tax Periods. With respect to any Taxes for any Taxable Period
-----------
that includes but does not end as of the Closing, the amount of Taxes subject to
indemnification hereunder shall be calculated as if such Taxable Period ended on
(and included) the Closing, except that property Taxes and exemptions,
allowances or deductions that are calculated on an annual basis shall be
prorated based on the number of days in the annual period elapsed through the
Closing compared to the number of days in the annual period elapsing after the
Closing.
V.4 Adjustment to Purchase Price. Any payment by the Purchaser or
----------------------------
APL under this Article V will be an adjustment to the Purchase Price, except as
prohibited by applicable law.
V.5 Tax Covenants.
-------------
(a) Certain Pre- and Post-Closing Tax Returns. APL shall prepare
-----------------------------------------
and timely file, or shall cause to be
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prepared and timely filed, in a manner consistent with past practice if changing
such practice would adversely affect a Tax Indemnitee, all Tax Returns (whether
separate or consolidated, combined, group or unitary Tax Returns that include or
relate to the Company) that are required to be filed (with extensions) with
respect to the Company on or before the Closing. APL shall timely pay or cause
to be timely paid all Taxes shown as due, or required to be shown as due, on
such Tax Returns. APL shall prepare and timely file, or shall cause to be
prepared and timely filed, in a manner consistent with past practice if changing
such practice would adversely affect a Tax Indemnitee, all Tax Returns (whether
separate or consolidated, combined, group or unitary Tax Returns that include or
relate to the Company) that are required to be filed (with extensions) with
respect to the Company after the Closing for any Taxable Period that ends on or
prior to the Closing. APL shall timely pay or cause to be timely paid all Taxes
shown as due, or required to be shown as due, on such Tax Returns. In addition,
APL shall prepare and timely file, or cause to be prepared and timely filed, in
a manner consistent with past practice as to the Company and timely pay all
Taxes with respect to, all consolidated, combined, group or unitary Tax Returns
that are required to be filed (with extensions) after the Closing with respect
to the Company for all other Taxable Periods that begin on or before and end
after the Closing; provided, however, that APL shall deliver the portion of any
-------- -------
such Tax Return that relates to the Company to the Purchaser at least 15 days
prior to the due date thereof and the Purchaser shall have the right to comment
on that portion of such Tax Return. At least 10 business days prior to the due
date of any payment required to be made with respect to any Tax Return described
in the preceding sentence, the Purchaser shall pay to APL any amount
appropriately reflected on such Tax Return with respect to the Company that is
attributable to any Taxable Period beginning after the Closing.
(b) Other Tax Returns. The Purchaser shall prepare and timely file,
-----------------
or shall cause to be prepared and timely filed, all Tax Returns that include or
relate to the Company other than those described in Section 5.5(a); provided,
--------
however, that with respect to any such Tax Returns, the Purchaser shall deliver
- -------
to APL any Tax Return that relates to any Taxable Period ending on or prior to
the Closing at least 15 days prior to the due date thereof and APL shall have
the right to comment on such Tax Return. At
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<PAGE>
least 10 business days prior to the due date of any payment required to be made
with respect to any Tax Return described in the preceding sentence, APL shall
pay to the Purchaser any amount appropriately reflected on such Tax Return with
respect to the Company that is attributable to any Taxable Period ending on or
prior to the Closing.
(c) FIRPTA Certificate. At the Closing, APL shall deliver to the
------------------
Purchaser, pursuant to Section 1445(b)(2) of the Code and Treas. Reg. (S)
1.1445-2(b)(2), a duly executed certification of non-foreign status. Such
certification shall conform to the model certification provided in Treas. Reg.
(S) 1.1445-2(b)(2)(iii)(B).
(d) Section 338 Election. At the request of the Purchaser, APL will
--------------------
join with the Purchaser in making an election under Section 338(h)(10) of the
Code and Treasury Regulation (S) 1.338(h)(10)-1(d) (the "Section 338
Regulations") (and, to the extent requested by the Purchaser, any election
comparable to Section 338(h)(10) of the Code under state, local or foreign Tax
law) (collectively, the "Section 338 Election") with respect to the acquisition
of the Shares by the Purchaser. APL and the Purchaser will cooperate with
regard to the timely preparation and filing of a Section 338 Election and any
and all forms with respect thereto under the laws of each appropriate
jurisdiction for which such election is made. In particular, and without
limiting the generality of the foregoing and subject to Section 5.5(e), APL
shall deliver to the Purchaser a duly executed and completed Internal Revenue
Service Form 8023 (or any successor form) and any similar state or local form to
be filed, as well as any required attachments (collectively, the "Section 338
Forms") no later than ninety (90) calendar days after the Closing. In the event
of any dispute with regard to the content of any Section 338 Form (including,
without limitation, the Section 338 Determinations), APL and the Purchaser shall
diligently attempt to resolve such dispute; but if APL and the Purchaser have
been unable to resolve such dispute by the sixtieth day prior to the date any
such form is to be filed, such dispute shall be resolved in accordance with the
procedures contained in Section 5.5(e) for the resolution of disagreements
regarding Section 338 Determinations. Each party shall promptly cause such
Section 338 Forms to be executed by an authorized person, and (subject to the
receipt of the other party's signature) the party
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responsible for filing such forms with its Tax Returns will duly and timely do
so, providing written evidence to the other party that it has done so. APL shall
pay any Taxes attributable to its sale of the Shares and the making of any
Section 338 Election, including, without limitation, any Tax imposed upon the
Company.
(e) Section 338 Determinations. APL and the Purchaser shall jointly
--------------------------
determine the liabilities of the Company, and allocate the "modified aggregate
deemed sale price" (or the "aggregate deemed sale price," if applicable, or any
deemed sale price comparable to the "modified aggregate deemed sale price" or
the "aggregate deemed sale price" required to be allocated under state, local or
foreign Tax law), such liabilities and other relevant items among the Company's
assets in accordance with Section 338 of the Code, the Treasury Regulations
promulgated thereunder and analogous provisions of state, local and foreign Tax
laws (such determination and allocation, the "Section 338 Determinations"). If
APL and the Purchaser are unable to agree with respect to any Section 338
Determination, APL and the Purchaser shall select an independent third firm of
accountants from among the "big five" accounting firms to which the parties
shall not unreasonably object to submit such disagreement for a final
determination. APL and the Purchaser agree to act in accordance with the
Section 338 Determinations, as finally determined pursuant to this Section
5.5(e), in the preparation and filing of all Tax Returns (including, without
limitation, any amended Tax Return and claim for refund) and in the course of
any tax audit, appeal or litigation relating thereto, unless advised by counsel
that it may not take such position without violating applicable law and without
incurring penalties and except as may be required by a final determination with
respect to any such issue. Upon payment of any indemnification obligations
hereunder resulting in an adjustment of the "modified aggregate deemed sale
price" (or the "aggregate deemed sale price," if applicable, or any deemed sale
price comparable to the "modified aggregate deemed sale price" or the "aggregate
deemed sale price" under state, local or foreign tax law), the Section 338
Determinations shall be appropriately adjusted in accordance with the procedures
described in this Section 5.5(e).
V.6 Transfer Taxes. Notwithstanding anything to the contrary in this
--------------
Article V, the Purchaser and APL shall bear equally the responsibility for all
transfer taxes
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arising in connection with the transactions under this Agreement.
V.7 Information to be Provided by the Purchaser. With respect to the
-------------------------------------------
period in 1999 prior to the Closing, the Purchaser shall promptly cause the
Purchased Entity to prepare and provide to APL, at APL'S expense, a package of
tax information materials relating to any Taxable Period ending on or prior to
the Closing Date computed as if the Closing Date were the last day of any such
Taxable Period (the "Tax Package"), which Tax Package shall include the
information, schedules and work papers and as to the method of computation of
separate taxable income or other relevant measure of taxation of the Purchased
Entity. The Purchaser shall cause the Tax Package for the portion of the
Taxable Period ending on the Closing to be delivered to APL within one hundred
twenty (120) days after the Closing.
V.8 Tax Proceedings.
---------------
(a) Right to Control Proceedings. APL shall have (i) the
----------------------------
responsibility for, and the right to control, at APL's expense, the audit (and
disposition thereof) of any Tax Return relating to any Taxable Period ending on
or prior to the Closing and (ii) the right to participate in the disposition of
the audit of any Tax Return relating to any Taxable Period beginning before and
ending after the Closing if such audit or disposition thereof could give rise to
a claim for indemnification hereunder (any such audit or disposition, a "Tax
Proceeding"); provided, however, that with respect to (i) and (ii) APL shall not
-------- -------
initiate any claim, settle any issue, file any amended Tax Return, take or
advocate any position or otherwise take any action that could adversely affect a
Tax Indemnitee or any of its Affiliates without the written consent of the Tax
Indemnitee, which consent shall not be unreasonably withheld or delayed.
(b) Notice; Reports. APL's right to control a Tax Proceeding shall
---------------
commence upon the receipt by the Purchaser or any of its Affiliates (including,
after the Closing, the Purchased Entity) of a proposed adjustment to Tax for the
period under audit or examination communicated in writing. The Purchaser shall
promptly notify APL in writing upon their learning of the pendency of a Tax
Proceeding and shall reasonably cooperate with APL in the conduct of such Tax
Proceeding. Any notification given by the Purchaser within 15 Business Days of
its learning of the
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<PAGE>
pendency of a Tax Proceeding shall constitute "prompt" notification for purposes
of this Section 5.8. The failure on the part of the Purchaser to promptly notify
APL of the pendency of a Tax Proceeding shall not in any way discharge APL's
indemnity obligations hereunder, except that the Purchaser shall be liable for
any increase in penalties, interest, other assessments or fees and expenses
which are due solely to any delay in promptly notifying APL of the pendency of
any Tax Proceeding and shall be responsible for any indemnity obligations to the
extent that APL is prejudiced as a result of such delay. If APL does not assume
the defense of a claim for a Tax made by a taxing authority with respect to
which APL has indemnified a Tax Indemnitee under Section 5.3, the Tax Indemnitee
may defend the same in such manner as it may deem appropriate, including, but
not limited to, settling such audit or proceeding with the consent of APL, which
consent shall not be unreasonably withheld. The Purchaser shall, and shall cause
the Purchased Entity to, reasonably cooperate with APL including providing
reasonable access to records, returns and supporting information, in connection
with any Tax Proceeding or matter as to which the Purchaser may seek indemnity
or other relief from APL under this Article V. The Purchaser promptly shall pay
APL any refunds, rebates or other recoveries received by the Purchased Entity to
which APL is entitled pursuant to Section 5.3(a).
V.9 Assistance and Cooperation. After the Closing, each of APL and
--------------------------
the Purchaser shall (i) assist (and cause their respective affiliates to assist)
the other party in preparing any Tax Returns or reports which such other party
is responsible for preparing and filing in accordance with this Article V, (ii)
reasonably cooperate in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of or including the Purchased Entity,
(iii) make available to the other and to any taxing authority as reasonably
requested all information, records, and documents relating to Taxes of the
Purchased Entity for any Taxable Period beginning before the Closing Date, (iv)
provide timely notice to the other in writing of any pending or threatened tax
audits, proposed adjustments or assessments of any Tax of or relating to the
Purchased Entity for Taxable Periods for which the other may have a liability
under this Article V and (v) furnish the other with copies of all correspondence
received from any taxing authority in connection with any tax audit or
information request with respect to any such Taxable Period.
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<PAGE>
V.10 Survival, Etc. Notwithstanding anything to the contrary
-------------
contained in this Agreement, the representations and warranties, the covenants
and agreements and the indemnification obligations set forth in Sections 5.2(a),
5.2(e), 5.2(g), 5.2(k) and 5.2(l) shall survive the Closing and shall remain in
effect until 60 days after the expiration of the applicable statute of
limitations (including any extension thereof) and the remaining representations
and warranties set forth in Section 5.2 shall not survive the Closing. The
indemnification obligations set forth in Section 5.3 and the covenants and
agreements set forth in Section 5.5 shall survive the Closing and shall remain
in effect until 60 days after the expiration of the applicable statute of
limitations (including any extension thereof).
ARTICLE VI
Conditions to Closing
---------------------
VI.1 Conditions to the Obligations of the Purchaser. The obligations
----------------------------------------------
of the Purchaser to consummate the transactions contemplated by this Agreement
are subject to the satisfaction at or prior to the Closing of the conditions set
forth in this Section 6.1, any one or more of which may be waived, in whole or
in part, by the Purchaser:
(a) Approvals. With respect to the HSR Act, the parties shall have
---------
procured such approvals, if applicable, or there shall have occurred the
expiration or early termination of the applicable waiting periods, if any, with
respect thereto without there being any continuing objection thereto. All
notices required to be given prior to Closing to, all filings required to be
made prior to Closing with, and all consents, approvals, authorizations, waivers
and amendments required to be obtained prior to the Closing from, any other
Governmental Entity or any third party in connection with the consummation of
the transactions contemplated herein and the financing thereof, have been made
or obtained, except for the notices, filings, consents, approvals,
authorizations, waivers and amendments, the failure to obtain would not have a
Material Adverse Effect.
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<PAGE>
(b) Orders. No party hereto shall be subject to any order, decree or
------
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the sale of the Stock or the transactions
contemplated by the Ancillary Agreements. In addition, no judgment, statute,
rule, regulation, executive order, writ, decree, ruling or injunction shall have
been enacted, entered, promulgated, made or enforced by any Governmental Entity
or court of competent jurisdiction which would have a Material Adverse Effect.
(c) Accuracy of Representations. The representations and warranties
---------------------------
of APL in this Agreement shall be true and correct in all material respects at
and as of the Closing as if made at and as of the Closing, and the Purchaser
shall have received a certificate, dated the Closing, of an executive officer of
APL to that effect. For the purposes of the foregoing condition, failures or
breaches which may be immaterial individually, but are material in the
aggregate, shall be deemed to be material.
(d) Performance of Covenants. APL shall have performed and complied
------------------------
in all material respects (other than Sections 4.2 and 4.3 which it shall perform
in all respects) with all covenants and agreements contained in this Agreement
that are required to be performed or complied with by it at or prior to the
Closing, and the Purchaser shall have received a certificate, dated the Closing,
of an executive officer of APL to that effect.
(e) Resignation of Directors. The directors of the Company shall
------------------------
have submitted their resignations in writing, effective as of the Closing, to
the Company.
(f) Ancillary Agreements. The Ancillary Agreements shall have been
--------------------
executed and delivered by the parties thereto and be in full force and effect.
(g) Intercompany Accounts. (i) All intercompany loans, advances and
---------------------
other extensions of credit made between the Company, on the one hand, and APL or
an Affiliate of APL (other than the Company), on the other hand, shall have been
eliminated and (ii) all cash and cash equivalents of the Company shall have been
transferred to APL.
(h) Financing Letters. The funding contemplated by the Financing
-----------------
Letters shall have been obtained on
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<PAGE>
substantially the terms set forth in the term sheets attached to the Financing
Letters.
(i) Material Adverse Effect. Notwithstanding the exception contained
-----------------------
in Section 2.10(a), from the date of this Agreement until the Closing there
shall not have occurred a Material Adverse Effect. Since the date of the NOL
Balance Sheet, there shall not have occurred events, changes, facts or effects
which, individually or in the aggregate, have had or are reasonably likely to
have a material adverse effect on the assets or properties, business, results of
operations or financial condition of NOL.
(j) Working Capital and Net Fixed Assets. Working Capital of the
------------------------------------
Company shall, as of the Closing Date, be not less than $(16,700,000); and Net
Fixed Assets of the Company shall, as of the Closing Date, be not less than
$95,000,000.
(k) Union Pacific Rail Agreement. The execution of a binding
----------------------------
agreement among the Union Pacific Railroad Company, APL and the Company
consistent with the term sheet attached as Exhibit I and otherwise containing
terms that are reasonably acceptable to Purchaser.
(l) CSX Agreement. The execution of a binding document among CSX
-------------
Corporation, APL and the Company consistent with the memorandum of understanding
attached as Exhibit J and otherwise containing terms that are reasonably
acceptable to Purchaser.
(m) List of Company Rights. APL shall have delivered to the
----------------------
Purchaser a list of Company Rights as provided in Section 2.24 which shall not,
individually or in the aggregate, have a Material Adverse Effect.
(n) Assignment of Leases. APL shall have assigned the leases for
--------------------
containers and chassis set forth on Attachment 1 to Schedule 2.14(a) to LTS, and
determined the number of chassis and established the mechanism to be put in
place to accomplish the objective set forth in the last sentence of Section
4.4(a), in each case that is reasonably acceptable to the Purchaser.
(o) NOL Lines of Credit. NOL shall have provided evidence reasonably
-------------------
acceptable to the Purchaser to the
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<PAGE>
effect that as of the Closing NOL will have greater than $500 million of
availability under its credit facilities with the Development Bank of Singapore
and that the proceeds of the sale of the Shares hereunder will be available to
NOL for general working capital purposes and will not be required to prepay any
monetary obligations before their stated maturity.
(p) Hub Agreement. APL, the Company and Hub International, Inc.
-------------
shall have entered into an agreement on terms reasonably acceptable to
Purchaser.
The Purchaser agrees to promptly notify APL in writing when it deems
the conditions set forth in Sections 6.1(k), (l), (m), (n), (o) or (p) to be
satisfied or waived.
VI.2 Conditions to the Obligations of APL. The obligations of APL to
------------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing of the conditions set forth in this
Section 6.2, any one or more of which may be waived, in whole or in part, by
APL.
(a) Approvals. With respect to the HSR Act, the parties shall have
---------
procured such approvals, if applicable, or there shall have occurred the
expiration or early termination of the applicable waiting periods, if any, with
respect thereto without there being any continuing objection thereto.
(b) Orders. No party hereto shall be subject to any order, decree or
------
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the sale of the Stock or the transactions
contemplated by the Ancillary Agreements. In addition, no judgment, statute,
rule, regulation, executive order, writ, decree, ruling or injunction shall have
been enacted, entered, promulgated, made or enforced by any Governmental Entity
or court of competent jurisdiction which would prevent the performance of APL's
obligations hereunder.
(c) Accuracy of Representations. The representations and warranties
---------------------------
of the Purchaser in this Agreement shall be true and correct in all material
respects at and as of the Closing as if made at and as of the Closing, and APL
shall have received a certificate, dated
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<PAGE>
the Closing, of an executive officer of the Purchaser to that effect.
(d) Performance of Covenants. The Purchaser shall have performed
------------------------
and complied in all material respects with all covenants and agreements
contained in this Agreement that are required to be performed or complied with
by it at or prior to the Closing, and APL shall have received a certificate,
dated the Closing, of an executive officer of the Purchaser to that effect.
(e) Ancillary Agreements. The Ancillary Agreements shall have been
--------------------
executed and delivered by the parties thereto and be in full force and effect.
(f) Shareholder Vote. The shareholders of NOL shall have approved
----------------
the transactions contemplated hereby pursuant to an extraordinary general
meeting.
VI.3 Pacer Extension. If Mile High exercises its option to extend
---------------
the Original Termination Date (as defined in the Pacer Merger Agreement)
pursuant to the Extension Letter, it shall promptly deliver a copy of the
Extension Notice (as defined in the Extension Letter) to APL.
ARTICLE VII
Termination
-----------
VII.1 Grounds for Termination. This Agreement may be terminated at
-----------------------
any time prior to Closing:
(a) Mutual Agreement. by the mutual written agreement of APL and the
----------------
Purchaser;
(b) Expiration. by APL or by the Purchaser if the Closing shall not
----------
have occurred on or before May 31, 1999; unless the failure to consummate the
Closing by such date (i) shall be due to the failure of the party seeking to
terminate this Agreement to have fulfilled any of its obligations under this
Agreement or (ii) is due to the continuance of a waiting period or lack of an
approval required under or an injunction or equivalent thereof entered based
upon the HSR Act, in which event no party may rely upon this Section 7.1(b) to
terminate this Agreement
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<PAGE>
until July 7, 1999; provided that Purchaser shall have 14 days after delivery by
APL of an agreement that APL believes in good faith satisfies Section 6.1(k) to
decide whether such agreement is reasonably acceptable to Purchaser, and if
Purchaser decides that such agreement is reasonably acceptable to Purchaser, and
notifies APL thereof in writing within such 14 day period, the expiration shall
be extended to the 30th day after the date of such acceptance, but in no event
earlier than May 31, 1999 or later than June 14, 1999, and if Purchaser does not
notify APL of its acceptance in writing within such 14 day period, the Agreement
may be terminated by APL or by the Purchaser; provided further that the
expiration date may be extended on at least a day for day basis with the written
consent of APL, which shall not be unreasonably withheld, but in no event later
than June 30, 1999, upon the waiver by the Purchaser and APL of the conditions
to Closing other than Section 6.1(h).
(c) Contravention of Law. By APL or by the Purchaser if consummation
--------------------
of the transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or Governmental Entity having competent
jurisdiction (other than as a result of the failure to obtain approval of the
shareholders of NOL); provided, that, the party seeking to terminate this
--------
Agreement pursuant to this clause (c) shall have used all commercially
reasonable efforts to remove such final order, decree or judgment;
(d) Breach. by APL or by the Purchaser if there has been a breach by
------
the other of any representation, warranty, covenant or agreement contained in
this Agreement which would result in a condition set forth in Section 6.1(c) or
(d) or Section 6.2(c) or (d) of this Agreement, as the case may be, not being
satisfied, which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach;
(e) Shareholder Vote. By APL or by the Purchaser if the approval of
----------------
the shareholders of NOL required by Section 6.2(f) shall not have been obtained
for any reason by May 14, 1999; and
(f) Superior Unsolicited Acquisition Proposal. By APL at any time
-----------------------------------------
prior to the earlier of (i) April 30, 1999 and (ii) the time the shareholders of
NOL shall have
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<PAGE>
voted to approve this Agreement if NOL or APL receives an unsolicited
Acquisition Proposal and determines in good faith upon the advice of its
financial advisors that such unsolicited Acquisition Proposal is superior in its
terms to the terms contemplated hereunder.
VII.2 Effect of Termination. (a) In the event that (i) this
---------------------
Agreement is terminated by either party pursuant to Section 7.1(b), (ii) the
reason for such termination is that the condition set forth in Section 6.1(h)
was not satisfied and (iii) the Purchaser is entitled to any amounts from the
stockholders of Pacer under the Pacer Merger Agreement, whether pursuant to any
termination provisions or otherwise, the Purchaser shall use commercially
reasonable best efforts to cause such stockholders (and not the Purchaser) to be
responsible for and include in any such amounts and pay to APL the reasonable
out-of-pocket expenses incurred by APL in connection with the transactions
contemplated by this Agreement;
(b) In the event that this Agreement is terminated by either party
hereto pursuant to Section 7.1(e) and Sections 7.2(c) and 7.2(d) do not apply,
then APL shall pay the Purchaser a fee of $2,000,000 plus its reasonable out-of-
pocket expenses. In the event that this Agreement is so terminated and NOL, APL
or an Affiliate thereof consummates, or enters into an agreement which is
subsequently consummated for, a transaction within 12 months of the date of such
termination, then APL, upon consummation, shall pay the Purchaser an additional
fee of $48,000,000;
(c) In the event that this Agreement is terminated by either party
hereto pursuant to Section 7.1(e) and (i) no meeting of shareholders of NOL was
convened by May 14, 1999 or (ii) the board of directors of NOL did not recommend
approval by the shareholders from the date of this Agreement though the date of
the meeting, then APL shall pay the Purchaser a fee of $20,000,000 plus its
reasonable out-of-pocket expenses. In the event that this Agreement is so
terminated and NOL, APL or an Affiliate thereof consummates, or enters into an
agreement which is subsequently consummated within 12 months of the date of such
termination, then APL, upon consummation, shall pay the Purchaser an additional
fee of $30,000,000;
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<PAGE>
(d) In the event that this Agreement is terminated by either party
hereto pursuant to Section 7.1(e) and APL held discussions with a Person with
respect to an Acquisition Proposal, then APL shall pay the Purchaser a fee of
$20,000,000 plus its reasonable out-of-pocket expenses. In the event that this
Agreement is so terminated and NOL, APL or an Affiliate thereof consummates, or
enters into an agreement which is subsequently consummated within 12 months of
the date of such termination, then APL, upon consummation, shall pay the
Purchaser an additional fee of $30,000,000;
(e) In the event that this Agreement is terminated by APL pursuant to
Section 7.1(f), then APL shall pay the purchaser a fee of $50,000,000 plus its
reasonable out-of-pocket expenses; and
(f) In the event of any termination of this Agreement, all
obligations of the parties hereto shall terminate, except the obligations of the
parties set forth in Section 4.6 hereto or this Section 7.2; provided, that (i)
--------
nothing in this Section 7.2 shall relieve any party from liability for willful
breach of this Agreement and (ii) if this Agreement is terminated pursuant to
Section 7.1(d) the terminating party shall be reimbursed by the other party for
its reasonable out-of-pocket expenses.
VII.3 Interest. Any monies owed by either party pursuant to Section
--------
1.3, Section 4.14 or Section 7.2 shall be payable by wire transfer of same day
funds within two business days after such amount becomes due. Each party
acknowledges that the agreements contained in Section 1.3, Section 4.14 and
Section 7.2 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, the other party would not enter
into this Agreement; accordingly, if a party fails to promptly pay the amount
due pursuant to Section 1.2, Section 4.14 or Section 7.2, and, in order to
obtain such payment, the other party commences a suit which results in a
judgment for the fee, the liable party shall pay the claiming party its costs
and expenses (including attorneys' fees) in connection with such suit, together
with interest on the amount of the fee at the rate of 8% per annum from the date
such fee was required to be paid.
ARTICLE VIII
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<PAGE>
Indemnification
---------------
VIII.1 Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Agreements. Except as provided in Section 8.8, the representations and
- ----------
warranties included or provided for herein shall survive the Closing until March
31, 2001 and the covenants and agreements provided for herein shall terminate on
the Closing; provided, however, that (i) the covenants and agreements of the
-------- -------
parties hereto shall survive the Closing unless or until they are otherwise
terminated by their terms, (ii) the representations and warranties contained in
Section 2.23 (Environmental Matters) shall survive to the Closing and shall
remain in effect until March 31, 2004 and (iii) the representations and
warranties contained in Section 2.17 (Employee Benefit Plans) shall survive the
Closing and shall remain in effect until 60 days after the expiration of the
applicable statute of limitations (including any extensions thereof) with
respect to matters addressed in such Section. All statements contained in any
Schedule hereto or in any certificate delivered by or on behalf of the parties
pursuant to this Agreement shall be deemed representations and warranties by the
parties hereunder.
VIII.2 Indemnification. For a period commencing on the Closing and
---------------
ending, as the case may be, upon the expiration of the applicable period
specified in Section 8.1, APL, on the one hand, or the Purchaser, on the other
hand (the "Indemnifying Party"), shall, subject to the limitations set forth in
this Article VIII hereof, indemnify and hold harmless respectively the Purchaser
and each of its Affiliates, officers, directors, employees and agents, on the
one hand, or APL and each of its Affiliates and their respective officers,
directors, employees and agents, on the other hand, as the case may be (each of
such persons and entities, an "Indemnified Party"), against and in respect of
all Losses resulting from (i) any misrepresentation or breach of warranty or the
nonfulfillment of any agreement, covenant or obligation by the Indemnifying
Party made in this Agreement, and (ii) the failure by the Indemnifying Party to
perform any agreement, consent or obligation of the Indemnifying Party contained
in this Agreement and (iii) any and all actions, suits, proceedings, claims,
demands, assessments, judgments incidental to the foregoing or the enforcement
of such indemnification.
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<PAGE>
VIII.3 Method of Asserting Claims, etc. All claims for
-------------------------------
indemnification by any Indemnified Party hereunder shall be asserted and
resolved as set forth in this Section 8.3. Any Indemnified Party seeking
indemnity pursuant to Section 8.2 or Section 5.3 shall give prompt notice to the
Indemnifying Party of the receipt by the Indemnified Party of a claim or demand
in the case of a third party claim (a "Third Party Claim"), and the amount or
the estimated amount thereof to the extent then feasible, and in the event that
an Indemnified Party shall assert a claim for indemnity under this Article VIII
not including a Third Party Claim, the Indemnified Party shall make such claim
by giving prompt notice thereof to the Indemnifying Party within the period of
time during which such representation or warranty survives the Closing pursuant
to Section 8.1 hereof. Such written notice shall specify with reasonable detail
the basis for such claim and the amount thereof. Following the timely giving of
such notice in accordance with Section 8.1, the Indemnified Party shall be
entitled to pursue its rights to be indemnified under this Article VIII for such
claim notwithstanding the subsequent expiration of the survival period
applicable to the representation or warranty upon which such claim is based;
provided, however, that any failure to provide such notice shall not constitute
- -------- -------
a waiver of the Indemnifying Party's indemnity obligations hereunder except to
the extent the Indemnifying Party is actually materially prejudiced thereby.
The Indemnifying Party shall have 30 days from the personal delivery or mailing
of such notice (the "Notice Period") to notify the Indemnified Party (i) whether
or not the Indemnifying Party disputes the liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such claim or demand and (ii)
whether or not it desires to defend the Indemnified Party against such claim or
demand. With respect to a Third Party Claim, in the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand, the Indemnifying
Party shall have the right to defend the Indemnified Party at the Indemnifying
Party's sole cost and expense and with counsel reasonably satisfactory to the
Indemnified Party. If the Indemnifying Party's right to assume the defense is
exercised, the Indemnifying Party shall be deemed to have waived all rights to
contest its liability to the Indemnified Party in respect of such Third Party
Claim. The Indemnifying Party shall not settle or compromise any Third Party
Claim that it elects to defend
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<PAGE>
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld. If the right to assume and control the defense is
exercised, the Indemnified Party shall have the right to participate in, but not
control, such defense at its own expense and the Indemnifying Party's indemnity
obligations shall be deemed not to include attorneys' fees and litigation
expenses incurred in such participation by the Indemnified Party after the
assumption of the defense by the Indemnifying Party. If the Indemnifying Party
has not elected to assume the defense of a Third Party Claim, the Indemnified
Party may defend and settle the claim for the account and cost of the
Indemnifying Party; provided, that the Indemnified Party will not settle the
--------
Third Party Claim without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. The Indemnifying Party will
promptly pay, or reimburse the Indemnified Party for payment of, costs and
expenses (including reasonable fees and expenses of counsel) incurred in the
defense thereof. The Indemnified Party shall cooperate with the Indemnifying
Party and, subject to obtaining proper assurances of confidentiality and
privilege, shall make available to the Indemnifying Party all pertinent
information under the control of the Indemnified Party. Notwithstanding the
foregoing, the Indemnifying Party shall not have the right to assume the defense
of any Third Party Claim, if (i) the Indemnified Party shall have been advised
in writing by counsel that there are one or more legal or equitable defenses
available to them which are different from or in addition to those available to
the Indemnifying Party, and, in the reasonable opinion of such counsel to the
Indemnified Party, counsel for the Indemnifying Party could not adequately
represent the interests of the Indemnified Party because such interests are in
conflict with those of the Indemnified Party, (ii) such action or proceeding
involves, or could have a material effect on, any material matter beyond the
scope of the indemnification obligation of the Indemnifying Party or involves or
could reasonably be expected to involve injunctive or other non-monetary relief
or (iii) the Indemnifying Party shall not have assumed the defense of the Third
Party Claim in a timely fashion that results in prejudicing the Indemnified
Party.
VIII.4 Limitation on Damages. In no event shall any Indemnifying
---------------------
Party be liable to any Indemnified Party for special, incidental, consequential
or punitive damages
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<PAGE>
other than such damages payable by any Indemnified Party as a result of a Third
Party Claim.
VIII.5 Exclusive Remedy. Each of APL and the Purchaser agrees that,
----------------
from and after the Closing, its sole and exclusive remedy with respect to any
and all claims against the other party relating to the subject matter of this
Agreement (other than the Ancillary Agreements) shall be pursuant to this
Article VIII (except for claims relating to Tax matters, which shall be governed
by Article V) and Section 7.2 hereof. In furtherance of the foregoing, each of
APL and the Purchaser hereby waives, from and after the Closing, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action it may have against the other party relating to the subject matter of
this Agreement arising under or based upon any federal, state or local statute,
law, ordinance, rule or regulation or otherwise; provided, however, that the
-------- -------
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof
without the necessity of posting a bond or any security, this being in addition
to any other remedy to which they are entitled at law or in equity.
VIII.6 Insurance Proceeds; Interest. In determining the amount of
----------------------------
any Loss for which any party is entitled to indemnification under this Article
VIII, the gross amount thereof (a) will be reduced by any insurance proceeds
realized by such party from third party insurers less the amount that is equal
to the present value of the aggregate future increased insurance policy premium
amounts (if any) attributable to the claims made for such Loss discounted at the
Company's weighted average cost of capital, (b) will be reduced by any Tax
benefits realized by such party in connection with such Loss to the extent such
Tax benefit results directly from the incurrence of such Loss and (c) will be
increased by any Tax detriments suffered by such party in connection with such
Loss to the extent such Tax detriments result directly from such indemnity
payment hereunder.
VIII.7 Deductible; Maximum Liability.
-----------------------------
(a) No claim for indemnification shall be brought under this Article
VIII for breaches of representations and warranties against an Indemnifying
Party unless and until the aggregate amount of all claims for indemnification
under
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this Article VIII for breaches of representations and warranties against such
Indemnifying Party exceeds $6,000,000, and then only for that portion of the
aggregate amount of claims that exceeds such amount.
(b) The indemnification obligations of either party under this Article
VIII shall be limited to a maximum aggregate liability of $150,000,000.
VIII.8 Tax Losses. Losses related to Tax matters are expressly
----------
excluded from this Article VIII and instead shall be governed by the provisions
of Article V.
ARTICLE IX
Certain Definitions
-------------------
IX.1 Certain Definitions. For all purposes of this Agreement, except
-------------------
as otherwise expressly provided or unless the context otherwise requires:
"Acquisition Proposal" has the meaning set forth in Section 4.2.
"Actual EBITDA" has the meaning set forth in Section 1.2.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means (a) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise, or (b) the ownership
of more than 25% of the voting securities of that Person.
"Agreement" means this Agreement by and between APL and the Purchaser,
as amended or supplemented together with all Exhibits and Schedules attached or
incorporated by reference.
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"Administrative Services Agreement" shall mean the Administrative
Services Agreement substantially in the form attached hereto as Exhibit B.
"Ancillary Agreements" shall mean the Non-Competition Agreement, the
Administrative Services Agreement, the Information Technology Access and License
Agreement, the Stacktrain Services Agreement, the TPI Chassis Sublet Agreement,
the Equipment Supply Agreement, the Shareholders Agreement and the Tax Sharing
Agreement.
"APL" has the meaning set forth in Section 2.3.
"Apollo" has the meaning set forth in Section 4.15.
"Balance Sheet" has the meaning set forth in Section 2.6(a).
"Benefit Plans" has the meaning set forth in Section 2.17(a).
"Business" shall mean the businesses engaged in by the Company as of
the date of this Agreement.
"Business Days" shall mean any day other than a Saturday, a Sunday or
a day on which banks in New York are authorized or obligated by law or executive
order to close.
"Closing" has the meaning set forth in Section 1.5.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended. All citations to provisions of the Code, or to the Treasury
Regulations promulgated thereunder, shall include any amendments thereto and any
substitute or successor provisions thereto.
"Company Rights" has the meaning set forth in Section 2.24.
"Confidentiality Agreement" shall mean the Confidentiality Agreement,
dated September 23, 1998, between NOL and the Purchaser and the Confidentiality
Agreement, dated October 7, 1998, between NOL and Pacer International, Inc.
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<PAGE>
"EBITDA" has the meaning set forth in Section 1.2.
"EBITDA Target" has the meaning set forth in Section 1.2.
"Employees" has the meaning set forth in Section 2.17(a).
"Environmental Law" means any international, national, provincial,
regional, federal, state, municipal or local law, rule, regulation, order,
judgment, decree, permit, authorization, license or common law or decisional law
(including without limitation principals of tort negligence, trespass, nuisance,
strict liability, contribution and indemnification) which regulates, establishes
standards or requirements or concerns liability with respect to the environment,
protection of or damage to natural resources or safety or health of human beings
or other living organisms as it relates to Hazardous Substance exposure,
including without limitation the manufacture, distribution in commerce,
transportation and use of Hazardous Substances.
"Equipment Supply Agreement" shall mean the Equipment Supply Agreement
substantially in the form attached hereto as Exhibit F.
"ERISA" has the meaning set forth in Section 2.17(a).
"ERISA Affiliate" has the meaning set forth in Section 2.17(c).
"Extension Letter" has the meaning set forth in Section 4.14.
"Final Income Statement" has the meaning set forth in Section 1.3.
"Financial Statements" has the meaning set forth in Section 2.6(a).
"Financing Letters" has the meaning set forth in Section 3.4.
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"GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time.
"Governmental Antitrust Entity" has the meaning set forth in Section
4.3(c).
"Governmental Entity" shall mean any court, administrative agency or
commission or other national, federal, state or local governmental authority or
instrumentality.
"Hazardous Substance" means any pollutant, contaminant, hazardous
substance, hazardous waste, toxic substance, oil or petroleum or petroleum-
derived substance, waste, asbestos, PCBs, radioactive material, or other
compound, element, material or substance in any form whatsoever (including
without limitation any product) that is regulated, restricted or designated as
such or under any Environmental Law.
"HSR Act" has the meaning set forth in Section 2.3.
"Indebtedness" has the meaning set forth in Section 2.6(b).
"Indemnified Party" has the meaning set forth in Section 8.2.
"Independent Firm" has the meaning set forth in Section 1.3.
"Information Technology Outsourcing and License Agreement" shall mean
the Information Technology Outsourcing and License Agreement based on the terms
attached hereto as Exhibit C.
"Insurance Proceeds" has the meaning set forth in Section 4.8(a).
"Intellectual Property Rights" has the meaning set forth in Section
2.24.
"Knowledge" shall mean, with respect to any Person, the knowledge of
any individual (except as otherwise indicated, upon reasonable investigation)
who (a) is serving as a director or officer of such Person, (b) is employed in
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the law department of such Person or (c) is currently employed by such Person
with responsibility for the particular subject area or subject matter.
"Law" shall mean applicable statutes, laws, codes, ordinances,
regulations, rules, Permits (as defined below), judgements, decrees and orders
of any Governmental Entity.
"Liability" shall mean any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Lien" shall mean any mortgage, pledge, security interest, lien,
charge, encumbrance, equity, claim, option, tenancy, right, community property
interest, right of first refusal, or restriction of any nature whatsoever
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"Logo" has the meaning set forth in Section 4.5.
"Losses" means any and all fines, liabilities, judgments, losses,
costs, deficiencies, penalties, expenses (including, without limitation, the
reasonable fees and expenses of investigation and counsel), or damages,
including in each case, interest and penalties.
"Material Adverse Effect" shall mean events, changes, facts or effects
which, individually or in the aggregate, (i) have had or are reasonably likely
to have a material adverse effect on the assets or properties, business, results
of operations or financial condition of the Company or (ii) which would
materially delay or prevent the performance of the obligations of any party
hereunder.
"Material Contracts" has the meaning set forth in Section 2.14.
"Mile High" has the meaning set forth in Section 3.6.
"Net Fixed Assets" shall mean as at any date of determination and
determined without duplication, consolidated property, plant and equipment of
the Company
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net of accumulated depreciation, computed in accordance with GAAP consistently
applied.
"NOL" has the meaning set forth in Section 2.3.
"Non-Competition Agreement" shall mean the Noncompetition Agreement
substantially in the form attached hereto as Exhibit A.
"Nonsolicitation Period" has the meaning set forth in Section 4.2
"Notice Period" has the meaning set forth in Section 8.3.
"NS" has the meaning set forth in Section 6.1(k).
"Objection" has the meaning set forth in Section 1.3.
"Pacer" has the meanings set froth in Section 3.6.
"Pacer Merger Agreement" has the meaning set forth in Section 3.6.
"Pacer Transaction" has the meaning set forth in Section 3.6.
"Pension Plan" has the meaning set forth in Section 2.17(b).
"Permit" shall mean any license, permit, franchise, certificate of
authority, order or other authorization, or any waiver of the foregoing,
required to be issued by any Governmental Entity.
"Permitted Liens" shall mean the following types of Liens: (a)
statutory Liens of landlords, statutory Liens of banks and rights of set-off,
statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and
materialmen, and other Liens imposed by law, in each case incurred in the
ordinary course of business (i) for amounts not yet overdue or (ii) for amounts
that are overdue and that (in the case of such amounts overdue for a period in
excess of 30 days) are being contested in good faith by appropriate proceedings,
so long as such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have
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<PAGE>
been made for any such contested amounts; (b) easements, rights-of-way,
restrictions, encroachments, and other minor defects or irregularities in title,
none of which is substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto, or impairs the operations of
the Company and (c) any zoning or similar law or right reserved to or vested in
any Governmental Entity to control or regulate the use of any real property that
do not materially impair the present use of the property subject thereto.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a Governmental Entity or any other entity.
"Purchase Price" has the meaning set forth in Section 1.2.
"Purchased Entity" shall mean the Company.
"Real Property" has the meaning set forth in Section 2.9(b).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement in substantially the form attached hereto as Exhibit G.
"Representative" has the meanings set forth in Section 4.2.
"Schedule" shall mean a disclosure schedule delivered by APL to the
Purchaser on or prior to the date of this Agreement.
"Section 338 Determinations" has the meaning set forth in Section
5.5(e).
"Section 338 Election" has the meaning set forth in Section 5.5(d).
"Section 338 Forms" has the meaning set forth in Section 5.5(d).
"Section 338 Regulations" has the meaning set forth in Section 5.5(d).
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<PAGE>
"Seller's Group" shall mean any (i) "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) or (ii) affiliated, combined, consolidated, unitary
or similar group for state, local or foreign Tax purposes that includes or
included APL or the Company or any predecessor of or successor to APL or the
Company (or another such predecessor or successor).
"Securities Act" has the meaning set forth in Section 2.5.
"Shareholders Agreement" shall mean the Shareholders Agreement in
substantially the form attached hereto as Exhibit G.
"Shares" has the meaning set forth in Section 1.1.
"Stacktrain Services Agreement" shall mean the Stacktrain Services
Agreement substantially in the form attached hereto as Exhibit D.
"Stock" has the meaning set forth in Recitals of this Agreement.
"Taxes" has the meaning set forth in Section 5.1.
"Tax Package" has the meaning set forth in Section 5.7.
"Tax Proceeding" has the meaning set forth in Section 5.8(a).
"Tax Reserve" has the meaning set forth in Section 5.2(e).
"Tax Return" has the meaning set forth in Section 5.1.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement in
substantially the form attached hereto as Exhibit K.
"Taxable Period" has the meaning set forth in Section 5.1.
"Third Party Claim" has the meaning set forth in Section 8.3.
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"TPI Chassis Sublet Agreement" shall mean the TPI Chassis Sublet
Agreement substantially in the form attached hereto as Exhibit E.
"Warn Act" has the meaning set forth in
Section 4.9.
"Welfare Plan" has the meaning set forth in Section 2.17(e).
"Working Capital" shall mean, as at any date of determination and
determined without duplication, the excess, if any, of (i) consolidated current
assets, computed in accordance with GAAP consistently applied, over (ii)
consolidated current liabilities, computed in accordance with GAAP consistently
applied, excluding in each case intercompany receivables and payables from and
to APL and its Affiliates (other than the Company) and third party payables
related to such intercompany receivables. Working Capital at Closing will be
prepared using the same types of management judgment, estimates, forecasts,
policies, opinions and allocations that were used for the Working Capital
calculation attached as Exhibit L hereto.
ARTICLE X
Miscellaneous
-------------
X.1 Amendments. This Agreement may not be amended or modified except
----------
by the express written consent of the parties hereto.
X.2 Assignment. Neither party may assign this Agreement or its
----------
rights or obligations hereunder, whether by operation of law or otherwise, to
any third party without the prior written consent of the other party.
X.3 Notices. All notices or communications hereunder shall be in
-------
writing and shall be sent by personal service, by facsimile transmission or by
overnight mail by courier of internationally recognized standing addressed as
follows (or such other address as such party may designate in writing):
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<PAGE>
To APL:
1111 Broadway
Oakland, CA 94607-5500
Attention: Timothy J. Windle
Facsimile: (510) 272-8932
With a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Steven B. Stokdyk, Esq.
Telephone: (310) 712-6624
Facsimile: (310) 712-8800
To the Purchaser:
Joshua Harris
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 261-4032
Facsimile: (212) 261-4102
and
Bruce Spector
c/o Apollo Management, L.P.
1999 Avenue of the Stars
Suite 1910
Los Angeles, CA 90067
Telephone: (310) 201-4124
Facsimile: (310) 201-4199
With copies to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 259-6640
Telephone: (212) 259-6685
Facsimile: (212) 259-6333
Any notice hereunder shall be effective upon receipt by the intended recipient.
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X.4 Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
X.5 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
X.6 Interpretation. When a reference is made in this Agreement to an
--------------
Article, Section, Exhibit or Schedule, such reference is to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" and
"including" are used in this Agreement, they are deemed to be followed by the
words "without limitation." For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (a) the
terms defined include the plural as well as the singular, (b) all accounting
terms not otherwise defined herein have the meanings assigned under GAAP, and
(c) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.
X.7 Entire Agreement. This Agreement, together with any agreement
----------------
executed and delivered by the parties concurrently herewith and the Schedules
and Exhibits attached hereto and together with the Confidentiality Agreement,
constitutes the entire agreement between the Purchaser and APL with respect to
the subject matter hereof. There are no representations, warranties, covenants
or
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undertakings with respect to the subject matter hereof other than those
expressly set forth herein. This Agreement supersedes all prior agreements
between the parties with respect to the Stock purchased hereunder and the
subject matter hereof, other than the Confidentiality Agreement.
X.8 Publicity. The parties jointly will prepare a news release or
---------
other announcement regarding this Agreement and, subject to their respective
legal obligations or stock exchange requirements, thereafter will consult with
each other regarding the text of any press release or other public statement
relating to the transaction contemplated by this Agreement prior to any release
or filing thereof.
X.9 Expenses. Subject to Article V and Article VIII, APL and the
--------
Purchaser each shall pay their own expenses incident to the negotiation,
preparation and performance of this Agreement and the transactions contemplated
hereby, including but not limited to the fees, expenses and disbursements of
their respective investment bankers, accountants and counsel.
X.10 No Third Party Beneficiaries. Nothing in this Agreement,
----------------------------
expressed or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
X.11 Jurisdiction. Each of the parties hereto hereby irrevocably
------------
submits in any legal action or proceeding relating to or arising out of this
Agreement, any of the Ancillary Agreements or any other document relating hereto
or delivered in connection with the transactions contemplated hereby, or for
recognition and enforcement of any judgment in respect thereof, to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York and appellate courts thereof. Each of the parties hereto further (a)
consents that any such action or proceeding may be brought in such court and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the same; (b) agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar
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<PAGE>
form of mail), postage prepaid, to such party at its address set forth in
Section 10.3 or at such other address of which such party shall have given
notice pursuant thereto; and (c) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law.
X.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first above written, by the duly authorized representatives of the
parties hereto.
COYOTE ACQUISITION LLC
By: /s/ Josh Harris
________________________________
Name: Josh Harris
Title: Vice President
APL LIMITED
By: /s/ Timothy J. Rhein
________________________________
Name: Timothy J. Rhein
Title: President and Chief Executive
Officer
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<PAGE>
EXHIBIT 4.5
-----------
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (this "Agreement"), dated as of May 28,
1999, among Neptune Orient Lines Limited, a Singapore corporation ("NOL"), APL
Limited, a Delaware corporation ("APL"), APL Land Transport Services, Inc., a
Tennessee corporation (the "Company") and Coyote Acquisition LLC (the
"Purchaser").
RECITALS
WHEREAS, APL and the Purchaser have entered a Stock Purchase Agreement,
dated as of March 15, 1999 (the "Stock Purchase Agreement"), pursuant to which
APL has agreed to sell to the Purchaser, and the Purchaser has agreed to
purchase from APL, shares of common stock of the Company.
WHEREAS, in connection with, and in order to induce Purchaser to
consummate, the transactions contemplated by the Stock Purchase Agreement, NOL
and APL are willing to enter into certain covenants, on behalf of themselves and
their Affiliates, to the Company and the Purchaser regarding their activities,
all as set forth herein.
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, the parties hereto agree as follows:
1. Defined Terms.
-------------
1.1 For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
"APLAL" means APL Automotive Logistics, a wholly owned subsidiary of APL.
"Automotive Logistics Business" means the provision of retail shipping
coordination, shipping management, shipping consolidation, product shipment,
parts inspections, loading and unloading of shipments, tracking of shipments,
warehousing of shipments, parts labeling, inbound sorting, truck load and milk
run management, kitting, sub-assembly, repackaging of shipments, bin management
performance, critical parts expediting and all other shipping and logistics
services related to or derived from the businesses of automotive manufacturers,
including the subsidiaries of those manufacturers who produce engines and other
products which are not used in automobiles.
"Confidential Information" shall have the meaning specified in Section 6.
<PAGE>
"IMS" means Intermodal Management Services, a division of American
Consolidation Services of North America, Ltd., a subsidiary of APL.
"Long-Haul Trucking Companies" means providers of transportation services
via trucks in the United States and Canada for distances in excess of 750 miles
per shipment.
"Non-compete Period" means the period from and after the Closing to the
tenth anniversary of the Closing.
"Non-Stacktrain Business" shall mean arranging retail intermodal
transportation services, including but not limited to, such services as are
arranged by IMS.
"Offer" shall have the meaning set forth in Section 3.
"Stacktrain Business" shall have the meaning set forth in Section 2.1.
"Third Party" means, with respect to NOL, APL, the Company or the
Purchaser, any Person that is not an Affiliate of NOL, APL, the Company or the
Purchaser, as the case may be.
"Transferee" means, with respect to the Stacktrain Business, the Non-
Stacktrain Business or the Automotive Logistics Business, any Third Party to
whom the Purchaser, the Company, NOL or APL, as the case may be, transfers all
or substantially all of the assets and liabilities of such Stacktrain Business,
Non-Stacktrain Business or Automotive Logistics Business.
1.2 Unless otherwise defined herein, each capitalized term used herein
shall have the meaning given to it in the Stock Purchase Agreement.
2. Non-competition by NOL, APL and their Affiliates.
------------------------------------------------
2.1 During the Non-compete Period, NOL and APL shall not, and shall not
permit any of their Affiliates to, engage, by ownership of debt or equity
interests in any business (other than the Company), by participation in the
management or operations of any business (other than the Company) or by lending
their respective names (or any part or variant thereof) to any business (other
than the Company) in the business being conducted on the date of this Agreement
by the Company (the "Stacktrain Business").
2.2 Subject to Section 3, the restrictions set forth in Section 2.1 shall
not prevent NOL, APL or any of their Affiliates from engaging in the Automotive
Logistics Business or the Non-Stacktrain Business; provided, however, that none
of NOL, APL or
<PAGE>
any of their Affiliates may market any domestic (United States or Canada) retail
intermodal services to any present or future customer to whom it does not
provide international transportation services.
2.3 NOL and APL acknowledge that the foregoing covenants by NOL and APL
are essential elements of the transactions contemplated by this Agreement and by
the Stock Purchase Agreement and that, but for NOL's and APL's agreement to
comply with such covenants, the Purchaser would not have agreed to enter into
such transactions. NOL and APL have consulted with their counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, including, without limitation, with respect to the area and duration
of the covenants herein; and that good and valuable consideration exists for
their agreeing to be bound by such covenants.
3. Non-solicitation.
----------------
3.1 Except as provided in the Information Technology Outsourcing and
License Agreement, during the Non-compete Period, NOL and APL shall not, and
shall cause each of its Affiliates not to, (i) directly or indirectly recruit or
solicit any person then employed by the Company for employment with NOL, APL or
any of their Affiliates or (ii) hire any person then employed by the Company who
had been an employee of the Business as of the Closing Date; provided, however,
that such restrictions shall not apply to any solicitation directed at the
public or the transportation industry in general nor to solicitation or hiring
of any employee if employment discussions are initiated by such employee.
3.2 During the Non-compete Period, Purchaser shall not, and shall cause
each of its Affiliates not to, (i) directly or indirectly recruit or solicit any
person then employed by NOL, APL or their Affiliates (other than the Company)
for employment with Purchaser or any of its Affiliates or (ii) hire any person
then employed by NOL, APL or their Affiliates who had been an employee of NOL,
APL or their Affiliates as of the Closing Date; provided, however, that such
restrictions shall not apply to any solicitation directed at the public or the
transportation industry in general nor to the solicitation or hiring of any
employee if employment discussions are initiated by such employee.
4. Assignment.
----------
4.1 Except as expressly set forth herein, no party may assign its rights
or obligations under this Agreement, whether by operation of law or otherwise,
without the prior written consent of the other parties.
4.2 NOL and APL may assign their rights and obligations hereunder to one
or more Transferees in connection with the sale of NOL or APL or all or
substantially all of the assets of NOL or APL provided that (a) the Transferee
shall be bound by the terms
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<PAGE>
and conditions of this Agreement as though it were a party hereto; and (b)
notwithstanding anything herein to the contrary, the Transferee shall not be
prevented from engaging in or conducting any business which it was engaging in
or conducting prior to such acquisition; and provided further that any such
assignment shall not release NOL or APL from their obligations hereunder.
4.3 The Purchaser may assign its rights hereunder to one or more
Transferees in connection with the sale of the Company or all or substantially
all of the assets of the Stacktrain Business, provided that the Transferee shall
be bound by the terms and conditions of this Agreement as though it were a party
hereto.
4.4 Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
5. Non-Disclosure.
---------------
The parties hereto acknowledge and agree that any proprietary financial,
marketing, customer or other information pertaining to the business or
operations of the Company are confidential ("Confidential Information"). The
term "Confidential Information" does not include information which (i) is or
becomes publicly available other than as a result of a disclosure by NOL, APL or
their Affiliates or Representatives or (ii) is or becomes available to NOL or
APL on a nonconfidential basis from a source (other than the Company and its
representatives) which, to NOL's or APL's knowledge after due inquiry, is not
prohibited from disclosing such information to NOL or APL by a legal,
contractual or fiduciary obligation to the Company. The term "Representatives"
means financial advisors, counsel and accountants.
NOL and APL shall not, and shall cause their Affiliates not to, disclose
any Confidential Information without the prior written consent of the Company;
provided, however, NOL and APL may reveal Confidential Information to its
Representatives (i) who need to know the Confidential Information for purposes
of their work, (ii) who are informed of the confidential nature of the
Confidential Information and (iii) who agree to act in accordance with this
Section 5. NOL and APL will cause their representatives to observe the terms
of this Section 5, and will be responsible for any breach of this Section 5 by
any of their Representatives.
In the event that NOL, APL or any of their Affiliates or Representatives
are requested pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the Confidential Information, NOL or APL will notify
the Company promptly so the Company may seek a protective order or other
appropriate remedy or, in its sole discretion, waive compliance with the terms
of this Section 5. In the event that no such protective order or other remedy
is obtained, or that the Company does not waive
-4-
<PAGE>
compliance with the terms of this Section 5, NOL or APL will furnish only that
portion of the Confidential Information that it is advised by counsel is legally
required and will exercise all reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded the Confidential Information.
-5-
<PAGE>
6. Miscellaneous.
-------------
6.1 The parties hereto recognize that, because of the nature of the
subject matter of this Agreement, money damages or other remedies at law may not
be sufficient or adequate remedies in the event of a breach of or violation of,
or default under, this Agreement and that any such breach, violation or default
or threatened breach, violation or default would cause irreparable injury to the
Company, the Purchaser, NOL, APL and their respective Affiliates. Accordingly,
NOL, APL, the Company or the Purchaser and their respective Affiliates shall
have the right, in addition to all other remedies available to them, to have the
provisions of this Agreement specifically enforced by any court of competent
jurisdiction, it being acknowledged and agreed by the Purchaser, the Company,
NOL and APL that an injunction may be issued without the posting of a bond or
other security interest being required against the Purchaser, the Company, NOL,
APL or any of their respective Affiliates to stop or prevent any such breach,
violation or default or threatened breach, violation or default.
6.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
laws.
6.3 If any covenant or agreement contained herein, or any part hereof, is
held to be invalid, illegal or unenforceable for any reason, the remainder of
this Agreement shall be construed as if such provision or part thereof was not
included herein; provided, that if the unenforceability of any such covenant or
-------- ----
agreement is because of the breadth of its scope, the duration of such provision
or the geographical area covered thereby, the parties agree that the court
making such determination shall have the power to reduce the breadth of the
scope or the duration and/or geographical area of such provision such that, in
its reduced form, said provision shall then be enforceable; provided further,
-----------------
however, that any such modification shall apply only with respect to the
- -------
operation of such provision in the particular jurisdiction in which such
determination is made.
6.4 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes all prior agreements
between the parties with respect to the subject matter hereof. There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein.
6.5 This Agreement may not be amended or modified except by the express
written consent of the parties hereto. Any waiver by the parties of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach thereof or of any other provision.
-6-
<PAGE>
6.6 All notices or other communications hereunder shall be in writing and
shall be made in accordance with Section 10.3 of the Stock Purchase Agreement.
6.7 Except as expressly provided in this Agreement, the parties hereto
intend that this Agreement shall not benefit or create any right or cause of
action in or on behalf of any person other than the parties hereto.
6.8 This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and each of the undersigned hereby represents and warrants that he or
she has been and is, on the date of this Agreement, duly authorized by all
necessary and appropriate action to execute this Agreement.
NEPTUNE ORIENT LINES LIMITED
By: /s/ Timothy J. Rhein
__________________________
Name: Timothy J. Rhein
Title: Director
APL LIMITED
By: /s/ Timothy J. Windle
__________________________
Name: Timothy J. Windle
Title: Assistant Secretary
APL LAND TRANSPORT SERVICES, INC.
By: /s/ Ann Fingarette-Hasse
__________________________
Name: Ann Fingarette-Hasse
Title: Assistant Secretary
COYOTE ACQUISITION LLC
By: /s/ Marc E. Becker
___________________________
Name: Marc E. Becker
Title: Vice President
-8-
<PAGE>
Exhibit 4.6
-----------
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement"), dated as of May
28, 1999, between APL Limited, a Delaware corporation ("APL" or the "Provider"),
and APL Land Transport Services, Inc., a Tennessee corporation ("LTS").
RECITALS
WHEREAS, APL and Coyote Acquisition LLC, a Delaware limited liability
company (the "Purchaser"), have entered into a Stock Purchase Agreement, dated
as of March 15, 1999 (the "Stock Purchase Agreement"), pursuant to which APL has
agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from
APL, shares of common stock of LTS.
WHEREAS, LTS desires to receive from the Provider and the Provider is
willing to provide to LTS certain administrative and support services as
described hereunder pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, the parties hereto agree as follows:
1. Administrative Services.
-----------------------
(a) APL shall make available and provide to LTS, in accordance with the
terms and conditions of this Agreement, certain administrative services as set
forth in Schedule A (the "Services").
(b) From time to time, LTS may request and APL may make available and
provide to LTS, as the parties may mutually agree, administrative and support
services in addition to those set forth in Section 1(a) above ("Additional
Services"). Such Additional Services shall be reflected in separate service
memoranda executed by both parties hereto and attached hereto as addenda, and
the terms of this Agreement shall govern all such addenda.
(c) APL shall perform and provide the Services and any Additional Services
for LTS in substantially the same manner with the same degree of care, skill
and prudence exercised by APL for its own operations. Subject to the provisions
of Section 6, APL shall be deemed to have satisfied its obligation to provide
the Services and Additional Services hereunder to the extent it has provided
such Services and Additional Services in accordance with APL's past practices in
connection with the provision of the same or similar procedures, facilities,
equipment, contractors and personnel that provided the Services or Additional
Services prior to the Closing (as defined in the Stock Purchase Agreement).
<PAGE>
(d) Subject to the provisions of Section 5, (i) LTS shall afford to APL,
its employees and authorized agents and representatives reasonable access to the
properties, books, records, contracts, documents, files and other information of
LTS to the extent necessary to enable APL to perform and provide the Services
and the Additional Services, and (ii) APL shall afford to LTS, its employees and
authorized agents and representatives reasonable access to all information
related to the Services or the Additional Services produced or generated by APL
in the course of providing the same, including without limitation, technical,
economic and business data, computer information data bases and the like.
(e) If during the term of this Agreement LTS desires to segregate its
operations from the operations of APL at any joint facilities shared by APL and
LTS, APL shall provide for physical segregation of LTS employees as long as the
costs required to achieve such segregation are reasonable and do not exceed
$50,000 in the aggregate; provided that if the actual costs are materially
higher than such amount the parties will negotiate in good faith the allocation
of such costs. The parties agree to use their best efforts to obtain leases or
subleases for the space occupied by LTS employees during the term of this
Agreement.
2. Fees.
----
(a) For Services and Additional Services for which APL shall be
compensated on a per transaction basis, LTS shall compensate APL in accordance
with the fee schedule set forth on Schedule A or as subsequently agreed to by
both parties in the case of Additional Services. For office space and associated
office services and front line office accounting and information resource
support, LTS shall compensate APL based on headcount or as subsequently agreed
to by both parties. For all other Services or Additional Services, LTS shall
compensate APL in an amount equal to the total amount of U.S. dollars expended
by APL in performing the Services or Additional Services for LTS including, but
not limited to, (i) the pro rata share of APL's costs, based on the number of
hours that APL employees spend performing Services or Additional Services for
LTS in relation to the total number of hours that APL employees spend performing
Services or Additional Services for APL and LTS combined, (ii) all travel costs
incurred by APL reasonably documented in performing the Services or Additional
Services for LTS, and (iii) any other out of pocket expenditures incurred by APL
in the course of performance of Services or Additional Services (Section
2(a)(i), (ii) and (iii) shall be the "Total Expenditures"). LTS shall pay to APL
the fees owned under this Agreement on a monthly basis, in arrears, commencing
on June 30, 1999 for as long as this Agreement remains in effect.
(b) APL represents and warrants to LTS that the transaction fees described
in Schedule A, when applied to the actual number of 1998 transactions, would not
differ adversely from the amounts reflected in the audited financial results for
the fiscal year ended December 25, 1998. In addition, APL represents and
warrants that the method for allocating
<PAGE>
costs associated with office space and associated office services and front line
office accounting and information resource support do not differ adversely from
the method for allocating such costs reflected in the audited financial results
for the fiscal year ended December 25, 1998. In the event of any inaccuracy of
this representation, the parties agree to make such adjustments in good faith to
amounts payable under this Agreement as are necessary (i) to correct such
inaccuracy and (ii) to compensate the party prejudiced by such inaccuracy.
(c) During the term of this Agreement, LTS shall have the right to audit,
at its expense, appropriate documents or information of APL to verify the Total
Expenditures; provided, however, that no more than two such audits may be
conducted within any twelve-month period . If the audit determines that the
Total Expenditures as presented by APL is more than 10% higher than actual Total
Expenditures, APL shall reimburse LTS for the reasonable expense of audit and
any overpayment of fees under this Agreement.
3. Term and Termination.
--------------------
(a) APL shall provide the Services and Additional Services to LTS
hereunder for the period beginning from the date of the Closing, and ending on
one year from the date of the Closing or, with respect to each particular
Service or Additional Service, (i) on the date specified in a notice of
termination delivered pursuant to Section 3(b) below with respect to such
Service or Additional Service or (ii) on such other date as is mutually agreed
to by both parties.
(b) LTS may terminate any portion of the Services or Additional Services
by giving 90 days' prior written notice to APL. If either party shall default in
the performance of any of its material obligations under this Agreement and
shall fail or refuse to remedy such default to the reasonable satisfaction of
the other party within 30 days after receipt of written notice, the non-
breaching party may terminate this Agreement. If the default in performance
relates only to a specific Service or Additional Service and such default is not
a default in the performing of a material obligation under this Agreement,
termination will be limited to termination of that Service or Additional Service
on the same terms as set forth in the immediately preceding sentence. If any
party shall become insolvent, be placed in receivership, make an assignment for
the benefit of creditors or seek relief or have a petition filed against it
under federal bankruptcy law, the other party may terminate this Agreement
immediately upon written notice.
(c) If action by a federal, state or other governmental regulatory agency
materially affects a party's rights or obligations hereunder, such party may
terminate any portion of the Services or Additional Services or this Agreement
by giving 90 days' prior written notice to the other, or such shorter period as
may be required by such agency or by law.
-3-
<PAGE>
(d) Expiration or termination of all or a portion of this Agreement for
any reason shall not terminate the obligations described in Sections 5 and 6
which shall survive any such termination.
(e) Expiration or termination of this Agreement for any reason shall not
terminate either party's obligations or rights arising out of any act or
omission of such party occurring prior to such termination or expiration.
4. Relationship.
------------
(a) Nothing in this Agreement shall be deemed to create a partnership,
joint venture, agency relationship or relationship of employer and employee
between the parties. In performing the Services and Additional Services, APL
will at all times be an independent contractor and neither party is to be
considered the agent or legal representative of the other for any purpose
whatsoever.
(b) APL, in providing the Services and the Additional Services, will be
solely responsible for (i) determining the terms and conditions of employment
between itself and its employees, agents and representatives, including without
limitation, hiring, termination, hours of work, rates and payment of
compensation, and (ii) the payment, reporting, collection and withholding of
taxes and similar contributions.
5. Confidential Information.
------------------------
(a) The parties hereto agree on behalf of themselves and their directors,
officers, employees and agents: (i) to hold in trust and maintain confidential,
(ii) not to disclose to others without prior written approval from the
disclosing party, (iii) not to use for any purpose, other than in connection
with this Agreement, and (iv) to prevent duplication of and disclosure to any
other party, any Information (as hereinafter defined) received from the
disclosing party or developed, presently held or continued to be held, or
otherwise obtained by the receiving party, under this Agreement.
(b) "Information" shall include all results of the Services and Additional
Services, information disclosed by either party orally, visually, in writing, or
in other tangible form in the course of providing or receiving Services or
Additional Services, and shall include, without limitation and as applicable,
technical, economic and business data, know-how, flow sheets, drawings, business
plans, computer information data bases, and the like.
(c) The foregoing obligations of confidentiality, non-disclosure and non-
use shall not apply to any Information to the extent that the obligated party
demonstrates that:
-4-
<PAGE>
(i) such Information is or becomes knowledge generally available to
the public other than through the acts or omissions of the obligated party
which constitute a breach of this Agreement;
(ii) such Information is subsequently received by the obligated
party on a non-confidential basis from a third party who did not receive it
directly or indirectly from the disclosing party; or
(iii) disclosure of such Information is required under applicable law
or regulations or in connection with a lawsuit, claim, litigation or other
proceeding or in connection with tax or regulatory matters.
(d) The terms and conditions of this Section shall survive any termination
of this Agreement.
6. Limitation of Liability. (a) APL shall have no liability under this
-----------------------
Agreement for damage or loss of any type suffered by LTS or any third party as a
result of the performance of Services or Additional Services provided hereunder
by APL except in the case of gross negligence or willful misconduct of APL and
(b) IN NO EVENT SHALL APL BE LIABLE FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES.
7. Excusable Delay or Failure in Performance. APL shall not be liable
-----------------------------------------
for failure to perform any of its obligations under this Agreement during any
time APL is unable to perform due to any act of God, sabotage, military
operation, national emergency, civil commotion, labor disturbance, utility or
computer failure, or the order, requisition, request or recommendation of any
government agency or acting government authority, or APL's compliance therewith,
or government proration, regulation, or priority, or any change in laws or
regulations which prevent APL from providing services required by this
Agreement, in each case beyond APL's reasonable control.
8. Notices. All notices or communications hereunder shall be sent by
-------
personal service, by facsimile transmission or by overnight mail by courier of
internationally recognized standing addressed as follows (or such other address
as such party may designate in writing):
To LTS:
c/o Josh Harris
Apollo Management, L.P.
1301 Avenue of the Americas
-5-
<PAGE>
38th Floor
New York, NY 10019
Facsimile: (212) 261-4102
To APL:
1111 Broadway
Oakland, California 94607-5500
Attention: Timothy J. Windle
Facsimile: (510) 272-8932
Any notice hereunder shall be effective upon receipt by the intended recipient.
9. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.
10. Arbitration. Any dispute, controversy or claim between APL and LTS
-----------
arising out of or relating to this Agreement, the Services or any Additional
Services, will be resolved by arbitration conducted in Oakland, California under
the auspices and according to the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be conducted in accordance with
the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Agreement.
11. Entire Agreement. This Agreement constitutes the entire agreement,
----------------
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements between the parties with respect to the subject matter
hereof. There are no representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
herein.
12. Severability. Any provision of this Agreement that is held by a court
------------
of competent jurisdiction to violate applicable law shall be limited or
nullified only to the extent necessary to bring the Agreement within the
requirements of such law.
13. No Assignment. Neither of the parties hereto may assign or transfer
-------------
any of its rights or delegate any of its obligations hereunder, whether by
operation of law or otherwise, to any other person or entity without the prior
written consent of the other party hereto. Any purported assignment or
delegation that is made other than in accordance with this Section 13 shall be
void and of no effect. Subject to the foregoing provisions of this Section 13,
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
-6-
<PAGE>
14. Waiver. This Agreement may not be amended or modified except by the
------
express written consent of the parties hereto. Any waiver by the parties of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach thereof or of any other provision.
15. Third Party Beneficiaries. Except as expressly provided in this
-------------------------
Agreement, the parties hereto intend that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto.
16. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and each of the undersigned hereby warrants and represents that he or
she has been and is, on the date of this Agreement, duly authorized by all
necessary and appropriate action to execute this Agreement.
APL LIMITED
By: /s/ Timothy J. Rhein
___________________________________
Name: Timothy J. Rhein
Title: President and Chief Executive Officer
APL LAND TRANSPORT SERVICES, INC.
By: /s/ Ann Fingarette-Hasse
___________________________________
Name: Ann Fingarette-Hasse
Title: Assistant Secretary
-8-
<PAGE>
SCHEDULE A
Services provided under this Agreement by APL to LTS on a per transaction fee
basis shall include:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Service Per Transaction Fee
------- -------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
Accounts Payable
- ---------------------------------------------------------------------------------------------
. Per paper invoice (vendor and employee expense report) $ 2.75
- ---------------------------------------------------------------------------------------------
. Per EDI/ERS transaction $ 1.15
- ---------------------------------------------------------------------------------------------
. Per employee paycheck (for payroll processing only) $ 10.00
- ---------------------------------------------------------------------------------------------
. Per manual voucher/check request $ 30.00
- ---------------------------------------------------------------------------------------------
. Per ACH/wire transfer (excluding direct bank charges) $ 3.20
- ---------------------------------------------------------------------------------------------
Cargo Claims
- ---------------------------------------------------------------------------------------------
. Per claim handled $ 46.00
- ---------------------------------------------------------------------------------------------
Walker Administration
- ---------------------------------------------------------------------------------------------
. Per cost center account setup $ 30.00
- ---------------------------------------------------------------------------------------------
</TABLE>
Other Services provided under this Agreement by APL to LTS shall include:
. office space and associated office services, inclusive of stationary and
supplies
. training (other than training relating to information systems) ordinarily
offered to applicable employees
. front line office accounting and information resource support
. for a period of up to 30 days after the Closing, (i) equipment dispatch
services at the Chicago and Houston terminal facilities and (ii) EDI clean-
up services at the Kearny terminal facility and such other locations as the
parties mutually agree upon
-9-
<PAGE>
Exhibit 4.8
-----------
STACKTRAIN SERVICES AGREEMENT
This Stacktrain Services Agreement (this "Agreement") is made as of this 28th
day of May, 1999 by and among AMERICAN PRESIDENT LINES, LTD ("Lines"), a
Delaware corporation, APL Co. Pte Ltd. ("APL Co"), a Singapore corporation, and
APL LIMITED, a Delaware corporation ("APL LTD") (collectively "APL"), and APL
LAND TRANSPORT SERVICES, INC., a Tennessee corporation ("LTS").
RECITALS
WHEREAS, LTS has been acting as agent for Lines under various rail
contracts, letters of intent and rail circulars for inland intermodal rail
transportation of Lines' International Shipments. The railroad contracts in
effect between LTS, Lines and the rail carriers as of the date of this Agreement
are referred to herein as "Current Agreements" and are identified on Schedule A.
WHEREAS, Lines and LTS desire to continue their relationship subsequent to
LTS' change in ownership and to have LTS arrange and administer inland
intermodal rail transportation for APL's International Shipments and empty
containers. In addition, APL LTD desires to have LTS arrange and administer
inland intermodal rail transportation for the volume of APL Automotive
Logistics, a division of APL LTD ("APL Automotive Logistics").
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
AGREEMENT
SECTION 1. EFFECTIVE DATE, TERM AND RENEWAL.
The term of this Agreement shall commence on the Closing pursuant to the
Stock Purchase Agreement and shall be for a term of twenty (20) years ("Term")
unless terminated earlier pursuant to the provisions of Section 13. In the
event that the Current Agreement with the Union Pacific Railroad Company ("UP")
or any successor railroad to UP ("Successor Railroad") is extended beyond the
Term or a New Agreement is entered into with UP or a Successor Railroad which
extends beyond the Term, the Term of this Agreement shall be extended to be co-
terminous with the term of the UP or Successor Railroad Current or New
Agreement. Upon the parties' mutual consent, the Agreement may be extended for
an additional period. A New Agreement is defined as any new rail contract which
is subsequently executed during the term of this Agreement.
Upon the failure of the parties to agree upon renewal of this Agreement or
upon giving by either party of notice of intent to terminate this Agreement
pursuant to the terms of the Agreement, the parties will use their best efforts
to establish a reasonable schedule and reasonable procedures for cessation of
transportation and related terminal and other activities in a way that will
cause the least disruption reasonably possible to the parties and their
customers. Transportation and related terminal and other activities during this
transition will be governed by the terms of this Agreement.
SECTION 2. DEFINITIONS.
Capitalized terms used in this Agreement which are not defined in the
Agreement itself shall have the meanings set forth in Schedule B to this
Agreement.
SECTION3. OBLIGATIONS OF LTS.
<PAGE>
a. Other than as set forth in Section 5 below, LTS shall arrange for
intermodal rail transportation and shall administer the ongoing movement of such
rail transportation from rail origin to rail destination of APL's International
Shipments and its empty containers between points in the United States, between
points in Canada and between points in the United States on the one hand and
Canada on the other hand. APL shall submit shipping instructions to LTS, and LTS
shall submit those shipping instructions to the appropriate carrier. LTS's
management obligations shall include managing the direct interchange of
containers between Eastern rail carriers and Western rail carriers and arranging
for the cross-town drayage of containers between Eastern rail carriers' rail
terminals and Western rail carriers' rail terminals where required. LTS shall
perform the same services for the volume tendered by General Motors to APL
Automotive Logistics for transportation between the United States, Canada and
Mexico ("APL Automotive Shipments") and for any other volume tendered by APL
Automotive Logistics or APL Intermodal Management Services, a division of
American Consolidation Services of North America, Ltd. ("IMS"), pursuant to
Section 4.c. The administrative services provided by LTS to APL for the
implementation of the services described in this Section 3.a during the Term of
this Agreement shall be at no less than the same level which APL received prior
to the execution of this Agreement.
b. In the event that LTS tenders untimely or incorrect movement billing
to the rail carrier or takes any other action such that (a) a container may fail
to meet its scheduled ship departure or (b) a container may not meet its
required delivery time to the ultimate consignee (collectively, the "Service
Failure"), and APL requests LTS to arrange alternative transportation where such
alternative transportation is operationally feasible, LTS shall arrange that
alternative transportation as long as such requests are not unreasonable or are
in response to specific customer requests. "Unreasonable" shall be defined as
being inconsistent with the process used by APL prior to the execution of this
Agreement to make decisions regarding the need for alternative transportation.
APL shall pay the applicable railroad rate for that container to LTS while LTS
shall pay the alternative carrier for the charge actually incurred for the
alternative transportation. However, LTS shall not be responsible for
alternative carrier charges when the Service Failure is due to the failure of
APL to perform its obligations hereunder or the failure of LTS' underlying rail
carrier. In that event, at the request of APL, LTS shall arrange for alternative
service on behalf of APL but APL shall bear the costs of that alternative
service. In the event that APL incurs additional costs due to a rail carrier's
service failure, LTS and APL shall use their best efforts to recover from the
responsible railroad(s) on APL's behalf the difference between the applicable
rail rate and the alternative carrier rate which APL paid.
c. For Current or New Agreements to which APL and LTS are both parties,
LTS and APL both agree that they shall not terminate such agreements without the
prior written consent of the other party.
d. LTS agrees that it shall continue to offer intermodal rail
transportation to IMS on terms and conditions similar to those which LTS offers
to its other intermodal marketing company ("IMC") customers during the term of
this Agreement.
e. LTS shall tender the percentage of LTS and International Shipments to
each rail carrier which is required under Current Agreements or under any New
Agreements.
f. APL shall pay LTS, and LTS shall pay each rail carrier, for the rail
charges incurred by APL under any Current or New Agreement. LTS shall pay each
rail carrier for the rail charges incurred by it under any Current or New
Agreement.
g. LTS shall follow the instructions of APL as to the routing of non-
committed volume, that is, volume that is not committed under any Current or New
Agreement. APL shall be responsible for paying the line haul charges of non-
committed volumes.
h. The parties agree to use their commercially reasonable efforts to co-
mingle all current and new Stacktrain Business as defined in the Non-Competition
Agreement which LTS or any of its affiliates or
2
<PAGE>
subsidiaries receives in those traffic lanes in which APL tenders International
Shipments in order to achieve the most cost effective economics for both
parties. If LTS would receive any economic or other benefits, and APL would
receive similar benefits, from using any other traffic lane, LTS shall use its
commercially reasonable efforts to move APL International Shipments in such lane
to the extent it would benefit APL.
i. In the event that LTS terminates the Current UP Agreement pursuant to
Section 24 thereof, LTS has the option of negotiating a separate agreement with
UP or transitioning APL's business to a new carrier along with LTS, in each case
on terms which maintain APL in no worse economic position than APL enjoys under
the Current UP Agreement.
SECTION 4. OBLIGATIONS OF APL.
a. Either Lines or APL LTD shall be a party to any Current Agreement or
New Agreement involving the transportation of International Shipments.
b. APL Co and Lines shall tender all of their shipments as described in
Section 3.a to LTS and shall appoint LTS as their agent for the tender and
administration of rail transportation. APL agrees further that it shall tender
to LTS under this Agreement any containerized freight tendered for U.S. or
Canadian rail movement under the name of APL or NOL or tendered by any of their
affiliates or subsidiaries or successors or assigns for rail transportation
except as provided in subsection (e) of this Section 4.
c. APL agrees that, if all other things are equal, including rates,
service and the approval of the beneficial owner, IMS and APL Automotive
Logistics shall use their best efforts to deliver their business to LTS for
handling.
d. APL shall pay LTS a management fee of $6.6 million annually during the
term of the Stacktrain Services Agreement.
e. APL shall use its best efforts to assure maximum stack car slot
utilization.
f. In the event that APL acquires or merges with, or is acquired by, any
other ocean carrier or transportation provider, the parties agree that the
volume of such acquired ocean carrier or transportation provider shall not be
subject to this Agreement unless agreed to by APL. However, in the event that
APL consolidates with or mergers with or into, or conveys, transfers or leases,
in one transaction or a series of transactions all or substantially all of its
assets to another ocean carrier or transportation provider, the acquiring entity
shall be obligated to tender to LTS on an annual basis for the remainder of the
Term at least the actual number of containers which APL tendered to LTS during
the twelve (12) months prior to the acquisition.
SECTION 5. JOINT OBLIGATIONS.
The parties shall jointly be obligated to the following:
a. LTS and APL shall jointly negotiate New Agreements or those
modifications to Current Agreements which apply to both LTS Domestic Shipments
utilizing APL Available Containers and/or APL International Shipments.
b. LTS and APL shall jointly discuss and negotiate with the underlying
rail carriers any ongoing service failures or the failure of a rail carrier to
meet Service Performance Standards which apply to both LTS Domestic Shipments
utilizing APL Available Containers and/or APL International Shipments.
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c. LTS and APL shall jointly discuss with a rail carrier any proposed
change in train schedules which negatively impacts International Shipments.
d. LTS and APL shall jointly negotiate any issues resulting from a change
or changes in operations which could result in a cost increase to APL.
e. LTS and APL shall make a good faith effort to structure a process to
handle billing and payment to minimize administrative expenses for both parties.
f. Each party shall be responsible for any shortfall penalties which arise
out of its failure to meet its volume commitment to the underlying rail
carriers. As an example, if APL tenders only 75% of its shipments for rail
carrier movement in a specific traffic lane when its Volume Commitment under the
applicable rail contract requires 95% of its shipments, and if, at the same
time, LTS tendered 95% of its shipments as required in that traffic lane, then
APL would be obligated to pay any shortfall penalties that may be assessed by
that carrier based on its portion of the combined LTS/APL volume in that traffic
lane. However, when either party has excess volume, the parties agree to
cooperate with each other to determine if that excess can be used to offset the
shortfall incurred by the other party in a manner consistent with the underlying
rail contract. Using the example above, if LTS tendered 100% of its shipments,
then the 5% excess over its 95% commitment could be used by APL as an offset to
its shortfall.
g. Neither party shall take any action regarding tender of volumes of
business to the railroads or payment of charges to the railroads which would
cause termination of any rail agreement.
h. In the event that the parties are unable to reach agreement on
subsections (a)-(g) above, the dispute resolution of Section 6 shall apply.
SECTION 6. DISPUTE RESOLUTION.
In addition to the matters specified in Section 5, the parties recognize
that there may be occasions where they are not in agreement concerning contract
negotiations, contract interpretation, service or train schedule issues, or any
other matter related to this Agreement. In such an event, the parties agree to
abide by the following dispute resolution process:
A. The parties will make a good faith effort to resolve any disputes at
the level of management within each company that would normally handle rail
contract negotiations, rail operating matters or other similar matters involving
any rail carrier. In the event that the parties cannot reach agreement at this
level of management, then the issue(s) will be submitted for senior management
consideration as provided in sub-paragraph (2) of this section. Either party
can submit the issue(s) to senior management at any stage of the negotiations at
which point the other party must similarly submit the issue(s) to its senior
management.
B. The parties agree that any issue that cannot be resolved under the
provisions of sub-section (1) above will first be submitted to the executive or
senior vice president ("SVP") level within each company. Those SVPs shall be the
individuals within each company to whom the persons in sub-section (1) report.
The SVPs for each company will make a good faith effort to resolve the dispute
in an expeditious manner. In the event that they cannot resolve the dispute, and
at any time during the negotiations, either party can submit the issue(s) to
their chief executive officer ("CEO") for resolution at which point the other
party must similarly submit the issue(s) to its CEO.
The CEOs for each company will then make a good faith effort to resolve the
dispute in an expeditious manner. In the event the CEOs cannot resolve the
dispute within ninety (90) days from the time that the dispute first arises,
either party may request that binding mediation be employed.
C. The mediation process shall be as follows: the mediation must be
completed within ninety (90) days after the request for mediation is made
("Ninety Day Mediation Period"). The parties will each select one person
experienced in transportation industry to act as mediators, and the two
mediators shall jointly
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select the third. Each party will pay the expenses of the mediator which that
party selects, and the parties will share equally the expenses of the third
mediator.
The mediators will first meet together with the parties. They shall then
meet separately with each party. The mediators will then conduct a joint
session to see if the issue(s) can be resolved. If there is no resolution, the
mediators shall issue a binding decision within the Ninety Day Mediation Period.
SECTION 7. RATES AND RATE ADJUSTMENTS.
a. APL shall pay to LTS the per container rate assessed against LTS under
the Current or New Agreements by its underlying rail carriers for the movement
of its containers. In addition, APL shall pay LTS the charges assessed against
LTS by those motor carriers performing cross-town drayage of APL's containers.
Any cost, most favored nations or market adjustment which LTS receives under
Current Agreements or any New Agreement or any motor carrier cross-town
agreements with LTS in effect at the date of the Closing shall be passed through
on a dollar for dollar basis to APL. LTS shall not assess any administrative
fee against APL.
b. LTS and APL agree to work together on (1) deciding whether to terminate
the Conrail Current Agreement after expiration of the 180 day period prescribed
by the Surface Transportation Board and (2) finding a satisfactory solution to
the handling of the Northeast business which recognizes APL's investment in and
reliance on the Kearny terminal.
SECTION 8. SERVICE PERFORMANCE.
(a) In the event that LTS receives a monetary service penalty payment under
any Current or New Agreement that involves a failure to provide service for
International Shipments or for a combination of International and LTS Shipments,
LTS shall pay a portion of that payment to APL based on the percentage of APL's
volume as part of the combined APL/ LTS' overall volume of business in the
affected traffic lane(s). Thus, if APL's containers represent thirty percent
(30%) of the combined APL/LTS' volume to a rail carrier in the affected traffic
lane(s) for the last twelve (12) month period, APL shall be entitled to thirty
percent of the service penalty payment.
(b) LTS shall furnish APL with a monthly written report on the rail
carriers' performance under any Current or New Agreements.
SECTION 9. TERMINAL SERVICES AND OFFICE SPACE TO BE PROVIDED BY APL.
a. South Kearny, N.J. APL shall provide terminal services for its own
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International Shipments, Domestic Shipments and Third Party International
Shipments at no cost to LTS at the South Kearny terminal to the extent that the
volumes do not exceed the volumes handled at APL's South Kearny terminal during
calendar year 1998 ("Base Volume") plus a five percent (5%) annual increase of
that Base Volume. To the extent that the volume exceeds the Base Volume plus
the annual five percent (5%) increase, LTS shall be charged at APL's actual
direct cost (excluding corporate overhead or other indirect costs). Such
services shall include loading and unloading of containers, and the storage of
containers and chassis as provided in the Equipment Lease and Chassis Sublet
Agreements.
In the event that CSX Transportation, Inc. or CSX Intermodal, Inc. becomes
the operator of the South Kearny terminal, APL shall refund to LTS a per unit
charge for each LTS Shipment of an amount equal to the amount paid by LTS for
the handling of such shipment. Such refund will be applicable only to the
volumes of LTS that do not exceed the LTS Shipments handled by APL at the South
Kearny terminal during the calendar year 1998 ("LTS Base Volume"), plus five
percent (5%) annual increase in that LTS Base Volume.
In the event that APL loses its lease for the South Kearny terminal, then
APL shall have no further obligation to provide terminal services for
International Shipments or LTS Shipments at South Kearny.
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b. Los Angeles, CA and Seattle, WA. At the request of LTS, APL shall
--------------------------------
offer loading and unloading services to LTS at Los Angeles and Seattle for LTS
shipments which originate or terminate at APL's on-dock facilities at Los
Angeles or Seattle. LTS shall pay $78 per lift at Los Angeles and $75 per lift
at Seattle. These amounts shall be cost adjusted annually for APL's out of
pocket costs, including wage benefits and related employee costs required by any
union agreements.
c. Office Space; Permitted Personnel. APL shall allow a designated number
----------------------------------
of LTS employees as set forth in Schedule C access to the South Kearny, Los
Angeles and Seattle terminals and shall provide office facilities in APL's own
office space for those employees on the terms set forth in the Administrative
Services Agreement. APL shall provide for physical segregation of LTS employees
as long as the costs required to achieve such segregation are reasonable and as
agreed upon in the Administrative Services Agreement executed on this same date.
d. Trains. In order for LTS to utilize the terminal services set forth in
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subsection (b) above, the LTS shipments must be on trains moving to or from
APL's on-dock facilities at Los Angeles and Seattle.
e. On-Dock Shipments. APL will designate certain containers for loading
------------------
or unloading at its on-dock rail facilities at Los Angeles and Seattle ("On-Dock
Facilities"). LTS will arrange for transportation of those designated
containers under rail rates applying from or to such On-Dock Facilities as
provided in the Current or New Agreements. APL shall load or unload the
containers at the Facilities at no cost to LTS. Designated containers shall
include (1) loaded export containers; (2) empty containers and (3) loaded import
containers. Designation of categories (1) and (2) shall be made at the time
that APL tenders the containers to LTS. Designation of category (3) shall be in
advance of arrival at the On-Dock Facilities.
f. On-Dock Shipments from/to Tacoma, WA. In the future, APL may elect to
-------------------------------------
route certain International Shipments to an on-dock rail facility at Tacoma, WA.
LTS and APL shall jointly negotiate rail rates for APL from and to the Tacoma
on-dock facility.
g. LTS Personnel. LTS agrees to maintain personnel at those rail
--------------
facilities which LTS had staffed prior to the date of this Agreement at a level
sufficient to ensure timely and efficient handling of APL's shipments consistent
with past practice.
h. To the extent that the Ports of Los Angeles and Long Beach assess a
charge for use of the "Alameda Corridor", the parties agree to pay such charge
to the Ports or to the rail carrier, as the case may be, for their own volumes
moving in the Alameda Corridor.
SECTION 10. EQUIPMENT STORAGE.
Under the Current Agreements and potentially under the New Agreements, LTS
and Lines jointly are entitled to storage of containers and chassis at certain
railroad locations. Except as provided in Exhibit D, LTS and Lines agree to
divide the railroad allocated parking spaces as well as spaces at shared
container yard locations based on the relative proportion of International
Shipments to all other LTS shipments in 1998. The number of parking spaces
initially allocated to LTS and to APL are shown by location on Schedule D; this
number shall be adjusted annually based on the percentage of volume which APL
and LTS had at each location during the prior year, except as otherwise provided
in Exhibit D.
SECTION 11. REPOSITIONING OF AVAILABLE CONTAINERS; CHASSIS SUPPLY.
APL shall make available to LTS all containers carrying Transpacific
International Shipments eastbound to interior U.S. points (a) after they are
made empty at their eastbound destination and (b) which APL does not need for
export loading or for empty repositioning for subsequent export ("Available
Containers"). APL will make such containers available at the points set forth in
Appendix 1 of the Equipment Supply Agreement. LTS shall advise APL within 48
hours whether it can load an Available
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Container. IF LTS advises that it cannot load an Available Container within 48
hours, then APL shall direct LTS as to the disposition of that Available
Container.
APL shall pay LTS the per container rates shown on the first and second
columns of Schedule E for the first 66,000 Available Containers which LTS loads
with Domestic Shipments for West Coast destinations in each calendar year. APL
shall pay LTS the per container rates shown on the third column (designated as
"secondary rates") on Schedule E for each Available Container loaded in excess
of 66,000 in each calendar year.
If LTS cannot load the Available Containers at the location where they are
made available ("Available Location") but can load them at an alternate
intermediate location on the normal transportation route between the Available
Container's original location and the West Coast ("Alternate Location"), APL
shall pay for the empty movement between the Available Location and the
Alternate Location. If, however, LTS desires to move an Available Container
from the Available Location to a location which is not on the normal route of
movement between the original location and the West Coast, LTS shall pay for the
empty movement.
APL and LTS agree that they may make additional agreements to allow LTS to
load Available Containers to points other than West Coast points. Such
agreements may be oral or in writing.
SECTION 12. CLAIMS FOR CARGO LOSS AND DAMAGE; EQUIPMENT DAMAGE.
a. LTS shall be responsible to APL for all freight loss or damage
proximately resulting from LTS' intentional or negligent acts or omissions.
LTS shall not be liable for freight loss or damage proximately resulting from
(i) an act of God, (ii) the act of an enemy, (iii) the acts of governmental
agencies/entities, (iv) negligent or intentional acts of APL or its customers or
(v) the negligent or intentional acts of any motor or rail carrier. In the
absence of LTS's negligence, APL's (and its customers') sole remedy for freight
loss or damage shall be against the underlying rail and/or motor carriers
pursuant to the terms and conditions of the Current or New Agreements, or when
the Current or New Agreements are inapplicable, those carriers' relevant
tariffs, circulars, or other publications relating to liability for loss of or
damage to freight.
Whether or not LTS would otherwise have liability, in any case where LTS
determines that APL or its customer has misdeclared or misdescribed freight, LTS
shall have no liability for any loss or damage to that freight.
With or without fault on its part, LTS will provide reasonable assistance
and cooperation to APL and its customers to investigate and process any freight
loss or damage claims against the underlying rail carriers; provided, however,
that LTS shall not be obligated to mediate resolution of claims between (a) APL
and the underlying rail carrier, (b) APL's customer and the underlying rail
carrier, or (c) between APL and its customer.
Any claim against LTS for freight loss or damage shall be made in writing
within twelve (12) months of the shipment date. Any arbitration action against
LTS for freight loss or damage shall be instituted within two (2) years of the
shipment date. Any claims or actions against underlying carrier(s) shall be made
in accordance with the time requirements set forth in the rail carrier's Current
or New Agreement, its intermodal circulars or other such publications, whichever
is applicable.
In any claim or arbitration action or legal proceeding against LTS under
this section, the value of the lost or damaged freight shall be based on the
invoice price of the lost or damaged freight, freight transportation and customs
charges, and the claimant shall not be entitled to recover special,
consequential or punitive damages, including damages for delay. The claimant
shall be under a duty to take all reasonable steps to mitigate its damages,
including using salvage procedures.
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b. LTS shall be liable to APL for any loss or damage to APL owned, leased
or controlled Equipment or for any injury to any employee, agent or
subcontractor of APL to the extent caused by LTS' intentional or negligent acts
or omissions. If LTS is found liable for such loss, damage or injury, LTS shall
also be liable for any expenses, including attorneys' fees, reasonably incurred
by APL in resolving such claims.
APL shall be liable to LTS for any loss or damage to LTS owned, leased or
controlled Equipment or for any injury to any employee, agent or subcontractor
of LTS to the extent caused by APL's intentional or negligent acts or omissions.
If APL is found liable for such loss, damage or injury, APL shall also be liable
for any expenses, including attorneys' fees, incurred by LTS in resolving such
claims.
c. In the event that a claim is made by any underlying carrier against
either party as the result of loss or damage caused by or arising out of the
negligence of APL or its beneficial owner shipper, APL shall indemnify LTS and
hold LTS harmless against all liability, loss, damage and expense, including
reasonable attorneys' fees, as to that claim. In the event that a claim is made
by any underlying carrier against either party as the result of loss or damage
caused by or arising out of the negligence of LTS or one of its domestic or
third party international customers, LTS shall indemnify APL and hold APL
harmless against all liability, loss, damage and expense, including reasonable
attorneys' fees, as to that claim.
SECTION 13. MATERIAL ADVERSE EFFECT; RENEGOTIATION; TERMINATION.
A. Material Adverse Effect. If any party is or will be adversely and
------------------------
materially affected by any of the following events beyond the party's control,
that party may request in writing that any or all of the provisions of this
Agreement be renegotiated:
(1) Serious inequity as a result of the application of, compliance with,
or performance of obligations under the terms and conditions of this
Agreement, change in material circumstances or conditions from those
prevailing on the Effective Date, or other events beyond the control
of a party which are of such a nature as to directly have a material
adverse effect on the operational (as opposed to financial) ability of
that party to perform its obligations under this Agreement; provided
that any renegotiation pursuant to this clause shall be consistent
with the economic arrangements embodied in this Agreement as of the
date hereof;
(2) The acquisition by LTS of an ocean carrier or of LTS by an ocean
carrier which ranks within the top ten carriers based on then current
market share as measured and reported by PIERS or another similar
industry analysis in the United States market ("APL Competitor");
(3) LTS enters into a substantial new joint venture, partnership, or
similar financial arrangement with an APL Competitor where such
arrangement is not limited to providing wholesale stacktrain services
to an APL Competitor and the result of such arrangement is effectively
equivalent to the transaction contemplated by A(2) above; or
(4) The acquisition of APL by a railroad or an intermodal marketing
company which ranks within the top ten based on then current market
share in the United States market.
Competitive transportation proposals, offerings, or services made to APL by
other rail carriers, as well as proposals, offerings or services made by LTS to
other customers and changes in the financial condition or liquidity of a party
shall not be grounds for a request for renegotiation under this Section 13.
Upon receiving written notice of a request to renegotiate, the parties
shall begin good faith negotiations pursuant to Section 6. A and B with the
intent of eliminating the adverse effect.
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Any provision which is renegotiated pursuant to this Section will take
effect upon the execution of an amendment or supplement to this Agreement or
upon execution of a new agreement.
B. Dispute Resolution. If after ninety (90) days of the written notice of
-------------------
a valid request for renegotiation pursuant to Section 13.A(1), the parties are
unable to agree upon a renegotiated provision or provisions, then the parties
shall engage in the mediation process set forth in Section 6.C.
C. Termination. If after ninety (90) days of the written notice of a
--------------
valid request for renegotiation pursuant to Section 13.A(2) or 13.A(3), the
parties are unable to agree upon a renegotiated provision or provisions, APL may
terminate this Agreement and all other related agreements upon one hundred
eighty (180) days written notice to LTS. If after ninety (90) days of the
written notice of a valid request for renegotiation pursuant to Section 13.A(4),
the parties are unable to agree upon a renegotiated provision or provisions, LTS
may terminate this Agreement and all other material agreements upon one hundred
eighty (180) days written notice to APL.
Upon termination of this Agreement, all parties shall complete their
performance and fulfill all obligations which accrued prior to the date of
termination, including but not limited to APL's obligation to pay all accrued
charges and LTS' obligation to arrange for Transportation for all containers
previously tendered by APL and to return to APL, at an interchange point or
other location or locations mutually agreed upon, all containers, and chassis
owned or provided by APL.
SECTION 14. CONFIDENTIALITY.
The parties agree that the commercial terms of this Agreement and its
appendices are confidential and proprietary, and that unauthorized disclosure
could be damaging from a commercial or competitive standpoint under many
circumstances. Therefore, except as otherwise provided in this Agreement and
except to the extent required by law, the contents of this Agreement shall not
be disclosed or released by any party to any person other than (a) a party's
employees, agents and legal advisors on a "need to know basis" and (b)
information relating to commodity, number of containers and origin or
destination to LTS' railroad partners on a "need to know" basis. In any
required disclosure of any portion of this Agreement, each party will cooperate
with the other party to minimize the disclosure of any confidential information
and to implement protective procedures relating to any information required to
be disclosed. Any employee having access to any part of this Agreement or to
any information contained within the Agreement or related to this Agreement must
agree to abide by the terms of this Section 14. This Section 14 includes,
without limitation, rate information of any kind, customer identities, traffic
volumes and commodities moving via APL, train schedules and/or performances, and
any other information learned by one party about the other's business during the
course of their dealings hereunder.
SECTION 15. HAZARDOUS MATERIALS; RESTRICTED COMMODITIES; PROHIBITED
COMMODITIES.
A. Except as otherwise stated in this Section 15, for each hazardous
commodity in a container tendered for Transportation, APL will complete and
submit to LTS the hazardous materials section of LTS' intermodal shipping
instructions. For each hazardous commodity in a container, APL will comply with
all applicable international, federal, state, and local regulations, including
but not limited to 49 CFR and the IMDG Code. APL will be required to provide
accurate and complete information for each hazardous load tendered to LTS in the
form of an EDI shipping order. LTS must in turn provide complete accurate
shipping information to the underlying carrier.
B. APL shall have the obligation to advise LTS as to any restricted
commodities which it or its customer wishes to ship. In the event that APL
properly and timely advises LTS of such restricted commodities and the
underlying rail carrier agrees to transport such restricted commodities, LTS
shall have the obligation to make all necessary arrangements with the underlying
rail carriers for the transportation of such restricted commodities.
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C. APL shall not tender to LTS any commodity that has been prohibited by
the rail carrier to be utilized by LTS or any commodity which LTS has itself
embargoed from movement on its rail network and LTS has given APL written notice
of the embargo. As of the effective date of this Agreement, all shipments of
coiled metal of any type have been embargoed by LTS.
SECTION 16. PAYMENT OF CHARGES.
APL will pay LTS within sufficient time to allow LTS to pay the rail
carriers as required under the Current or New Agreements. LTS will pay within
thirty (30) days all payments arising under this Agreement or the Schedules.
Consistent with Section 5.e, the parties shall work together to develop a
payment process which minimizes administrative expenses and attempts to keep the
parties cash neutral.
APL may elect to pay the rail carriers as required under the Current or New
Agreements so long as LTS is not adversely affected. If APL does not so elect,
in order to secure APL's obligations to LTS for payments made to rail carriers
under Section 3(f) hereof, APL agrees to deliver to LTS (and cause to remain
outstanding) a standby evergreen letter of credit in form and substance, and
issued by a bank, reasonably acceptable to LTS and APL. Such letter of credit
shall be in a face amount equal to 110% of the average of the four highest
monthly accounts receivable balances to LTS from APL and its Affiliates during
the prior fiscal year; provided that in the event that the aggregate amount of
rail charges incurred by APL but not paid under any Current Agreement or New
Agreement exceeds 85% of such face amount, APL shall deliver to LTS an
additional letter of credit (or a replacement therefor) with a face amount equal
to 120% of such excess amount. Conditions to drawings under such letter of
credit shall include (i) APL's failure to pay LTS for any shipment within 45
days of LTS mailing an invoice therefor, (ii) LTS' receipt of notice from the
issuer of the letter of credit that the stated termination date shall not be
extended and (iii) APL's failure to replace the letter of credit within 60 days
of the credit rating of the issuer falling below investment grade.
Records of APL and LTS related to rates, charges, liquidated damages,
payments, and billing will be available for inspection by the other party during
normal business hours at locations agreed upon by the parties, subject to the
limitations of Section 14.
SECTION 17. MUTUAL INDEMNITY.
Except with respect to cargo claims, and except where remedies are
specified in this Agreement, each party to this Agreement shall indemnify and
hold the other party harmless against all liability, loss, damage, and expense,
including attorneys' fees (collectively, "Costs"), reasonably incurred by the
other party to the extent that such liability, loss or damage is caused by the
negligent or intentional act or by any default under this Agreement by the
indemnifying party or any of its employees. In addition, APL shall hold LTS
harmless against all Costs reasonably incurred by LTS as the result of APL's
customer's failure to comply with all federal, state and local regulations
applicable to the shipment of a hazardous commodity.
SECTION 18. FEDERAL CONTRACTOR REQUIREMENTS.
A. To the extent applicable, APL and LTS will comply with and give all
representations and assurances required by any law or regulation applicable to
federal contracts and subcontracts including but not limited to the following:
1. To the extent applicable, the Renegotiation Act of 1951, as amended
(50 U.S.C. (S)(S) 35, 45), and the Contract Work Hours and Safety
Standards Acts, as amended (40 U.S.C. (S)(S) 327, 333);
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2. To the extent applicable, Executive Order No. 11246, dated September
14, 1965, as amended, concerning equal employment opportunity and
affirmative action in employment of persons without regard to race,
religion, sex, or national origin, Executive Order No. 11701, dated
January 24, 1973, concerning affirmative action in employment of
certain veterans, Executive Order No. 11758, dated January 15, 1974,
concerning affirmative action in employment of handicapped
individuals, Executive Order No. 11625, dated October 13, 1971,
concerning assistance to minority business enterprises, Executive
Order No. 12138, dated May 18, 1979, concerning assistance to women's
business enterprises, the Age Discrimination Act of 1975, all
applicable regulations of the Secretary of Labor, including but not
limited to 41 C.F.R. (S) 60-1.4 et seq., 41 C.F.R. (S) 60-250 et seq.,
and 41 C.F.R. (S) 60-741 et seq., and all applicable Federal
Procurement Regulations, including but not limited to 41 C.F.R. (S) 1-
1.13 et seq.; and
3. To the extent applicable, Defense Acquisition Regulations 7-104.14,
concerning use of small business and minority business concerns, and
7.104.20, concerning use of labor surplus area concerns.
B. To the extent applicable and required, APL and LTS each hereby certify
to the other that it does not and will not maintain any facilities for employees
that are unlawfully segregated or permit employees to perform services at any
location under its control or that of its subcontractors where unlawfully
segregated facilities are maintained and that it will require its nonexempt
subcontractors to furnish a similar certification prior to the award of any
nonexempt subcontract.
SECTION 19. FORCE MAJEURE.
In the event that any party is unable to meet its obligations under this
Agreement as a result of any cause beyond its reasonable control, including but
not limited to, strikes or lockouts, labor shortages or disturbances,
derailments or other casualties, acts of God, severe weather, acts of
governmental authority and acts or omissions of third parties (collectively,
"force majeure conditions"), the performance obligations of the party affected
by a force majeure condition shall be suspended to that extent for the
duration of such event; provided, however, that the parties shall make all
reasonable efforts to continue to meet their obligations during the duration of
the force majeure condition; and provided, further, that the party declaring a
force majeure condition shall notify the other party by facsimile when the force
majeure condition exists, the nature of the force majeure and when the condition
is terminated. The suspension of any obligations owing to a force majeure
condition shall neither cause the term of this Agreement to be extended nor
affect any rights accrued under this Agreement prior to the force majeure
condition. To the extent that LTS ' underlying rail carrier declares a force
majeure condition, LTS' and APL's obligations under this Agreement shall be
suspended for the duration of that force majeure condition. LTS shall use its
best efforts to arrange alternative transportation for APL International
Shipments during the force majeure condition.
SECTION 20. ASSIGNMENT.
Except as expressly allowed by this Section, no party to this Agreement may
assign this Agreement, in whole or in part, or assign any rights granted by this
Agreement, or delegate to any person not a party to this Agreement any of its
obligations under this Agreement without the prior written consent of the other
party. Subject to this Section, this Agreement will be binding upon and inure
to the benefit of the parties hereto and to their permitted successors and
assigns.
SECTION 21. NOTICES.
Except as otherwise stated in this Agreement, all notices required by or
given under this Agreement will be sufficient in all respects if in writing and
delivered personally, by first class, registered,
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or certified U. S. mail, by telecopier, by electronic transmission, or by
commercial overnight delivery service, postage or delivery fees prepaid,
addressed as follows:
To: APL
1111 Broadway
Oakland, CA 94607
Attn: Timothy J. Windle
Facsimile: (510) 272-8932
With a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Steven B. Stokdyk, Esq.
Telephone: (310) 712-6624
Facsimile: (310) 712-8800
To: APL Land Transport Services, Ltd.:
Joshua Harris
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 261-4032
Facsimile: (212) 261-4102
and
Bruce Spector
c/o Apollo Management, L.P.
1999 Avenue of the Stars
Suite 1910
Los Angeles, CA 90067
Telephone: (310) 201-4124
Facsimile: (310) 201-4199
With a copy to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 259-6640
Telephone: (212) 259-6685
Facsimile: (212) 259-6333
SECTION 22. NONWAIVER.
Any waiver at any time of a breach of any provision, condition, obligation,
or requirement of this Agreement will extend only to the particular breach so
waived and will not impair or affect the existence of any provision, condition,
obligation, or requirement of this Agreement or the right of any party
thereafter to avail itself of any breach, subject to such waiver.
12
<PAGE>
SECTION 23. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
SECTION 24. ENTIRE AGREEMENT.
This Agreement, together with any agreement executed and delivered by the
parties concurrently herewith and the Schedules attached hereto and together
with the Confidentiality Agreement, constitutes the entire agreement between LTS
and APL with respect to the subject matter hereof. There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements between the parties with respect to
the subject matter hereof, other than the Confidentiality Agreement.
SECTION 25. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement, expressed or implied, is intended to confer upon
any person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 26. NO AMENDMENTS WITHOUT WRITTEN CONSENT.
This Agreement may not be amended or modified except by the express written
consent of the parties hereto.
SECTION 27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.
SECTION 28. REPRESENTATIONS.
APL represents and warrants to LTS that, with regard to revenues associated
with repositioning, had the initial rates in Schedule E been in effect during
the fiscal year ended December 25, 1998, the audited operating results of LTS
for such period would not have been negatively affected. In the event of any
inaccuracy of this representation, the parties agree to make such adjustments in
good faith to amounts payable under this Agreement as are necessary (i) to
correct such inaccuracy and (ii) to compensate the party prejudiced by such
inaccuracy.
13
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first above written, by the duly authorized representatives of the
parties hereto.
APL LIMITED
By:/s/ Timothy J. Rhein
_________________________________
Name: Timothy J. Rhein
Title: President and Chief Executive Officer
AMERICAN PRESIDENT LINES, LTD.
By: /s/ Timothy J. Windle
__________________________________
Name: Timothy J. Windle
Title: Assistant Secretary
APL LAND TRANSPORT SERVICES, INC.
By: /s/ Ann Fingarette Hasse
__________________________________
Name: Ann Fingarette Hasse
Title: Assistant Secretary
APL CO. PTE LTD.
By /s/ Frederick M. Sevekow, Jr.
__________________________________
Name: Frederick M. Sevekow, Jr.
Title: Authorized Signature
14
<PAGE>
SCHEDULE A
CURRENT AGREEMENTS
Union Pacific Railroad Company, Transportation Service Agreement, dated
September 1, 1985, Memorandum of Understanding, dated December 15, 1995, and
related agreements.
Consolidated Rail Corporation, Transportation Service Agreement, dated June 1,
1988 and related agreements.
Canadian National Railway, Letter of Intent dated June 22, 1998.
Norfork Southern Corporation, Rail Transportation Agreement, dated January 10,
1996.
15
<PAGE>
SCHEDULE B
DEFINITIONS
"Affiliate" shall have the meaning set forth in the Stock Purchase Agreement
"Agreement" means this Agreement by and between APL and LTS, as amended or
supplemented together with all Schedules attached hereto.
"APL Automotive Logistics" shall have the meaning set forth in the Recitals to
this Agreement.
"APL Automotive Shipments" shall have the meaning set forth in Section 3.
"APL Competitor" shall have the meaning set forth in Section 13.
"Available Containers" shall have the meaning set forth in Section 11.
"Current Agreements" shall have the meaning set forth in the Recitals of this
Agreement.
"IMC" shall have the meaning set forth in Section 3.
"IMS" shall have the meaning set forth in Section 3.
"International Shipments" shall mean APL's containers with a prior or subsequent
water movement.
"LTS Shipments" shall mean all shipments other than International Shipments.
"On-Dock Facility" shall have the meaning set forth in Section 9.
"New Agreement" shall have the meaning set forth in Section 1.
"Service Failure" shall have the meaning set forth in Section 3.
"Service Performance Standards" shall mean those service standards defined in
the Current Agreements.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement, dated as of
March 15, 1999, between APL and Purchaser.
"Train Schedule" shall mean a train schedule set forth in the Current
Agreements.
"Transpacific International Shipments" shall mean International Shipments
between Asia and the Americas.
"Volume Commitment" shall have the meaning set forth in Section 5.
16
<PAGE>
SCHEDULE C
LTS EMPLOYEES AT APL LOCATIONS
Los Angeles
- -----------
None
Seattle
- -------
Jeff Hall
Mike Hill
Rich Lund
South Kearny
- ------------
Bill Vossen
Gary Biggs
17
<PAGE>
SCHEDULE D PART 1
RAIL TERMINAL
ALLOCATION OF PARKING SPACES
<TABLE>
<CAPTION>
POINT SPOTS % APL % LTS # APL # LTS
- ---------------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Atlanta 400 44 56 176 224
Baltimore 175/(1)/ 43 57 75 100
Boston 100 59 41 59 41
Buffalo 100 44 56 44 56
Charlotte 100/(2)/ 63 37 63 37
Charleston 50 73 27 37 13
Chicago 59th St. 100 51 49 51 49
Chicago Global 1 250/(3)/ - - 20 230
Cincinnati 50/(4)/ 37 63 19 31
Cleveland 25/(5)/ 54 46 14 11
Columbus 50 73 27 37 13
Houston 250/(9)/ 54 46 50 200
Jacksonville 60 69 31 41 19
Kearny (CSXI) 760/(6)/ 63 37 479 281
Memphis (CSXI) 20 87 13 17 3
Norfolk/Portsmouth 20 62 38 12 8
Philadelphia 125/(7)/ 43 57 54 71
Portland 35 24 76 8 27
Savannah 50 79 21 40 10
Springfield 25 33 67 8 17
Syracuse 75/(8)/ 44 56 33 42
Worcester 25 17 83 4 21
</TABLE>
/(1)/ Includes chassis and container spots. Also includes 100 chassis/container
spaces for Harrisburg Volumes.
/(2)/ Includes 40 spaces representing Greensboro Volumes.
/(3)/ Exception to the Volume split methodology as stated in Section 10 of the
Stracktrain Services Agreement. Historic use of Global 1 space is for empty high
cube domestic containers.
/(4)/ Includes Georgetown, KY Volumes.
/(5)/ Includes Pittsburgh, PA Volumes.
/(6)/ Includes both chassis and container spots.
/(7)/ Includes both chassis and container spots. Includes current Morrisville
Volumes which will convert to the CSXI Philadelphia Terminal effective 12/1/99.
/(8)/ Include 50 spaces for Albany Volume.
/(9)/ Space allocated based on historical use.
18
<PAGE>
SCHEDULE D, PART 2
CY
PARKING ALLOCATION
Western Region
--------------
Location Capacity/(Decking) APL LTS
-------- ------------------ --- ---
Los Angeles
Cal Cartage 80
Container Care 300+
Fastlane 500+
Harbor Rail 100
R.C.C. 50-100
Total Intermodal 500+
Container Works 100
Martin Container 200
Oakland Hawk 100
Stockton Hawk 125
Portland P.C.R. 200-300
Seattle Container Care 300
PCH 15
19
<PAGE>
Central Region
--------------
Chicago Paulina 450
TLI near G1 750
TLI near Dolton 750
Cincinnati 325
Cleveland 600
Columbus CIC 625
Detroit Tri Modal 450
Grand Rapids 60
Indianapolis 350
Kansas City 700
Louisville 250
Minneapolis Trimodal 1500
Milwaukee 40
Omaha 300
Pittsburgh 100
St. Louis SAUGET 2000
St. Louis Dupo 800
Toledo 50
20
<PAGE>
Eastern Region
--------------
Allentown 20
Baltimore 310
Boston 350
Harrisburg 75
Morrisville 260
Norfolk 125
Rochester 60
Worcester 100 Domestic Empty Lot
21
<PAGE>
Southern Region
---------------
Atlanta (APL) 575
Transus 100
Charlotte East West 300
Bomar 150
Charleston 200
Savannah 150
Tampa 200
Orlando 100
Miami 250
Jacksonville --- Use NSRR
Nashville 200
Huntsville 600
Memphis Delta 800
ATS 300 Under Development
New Orleans 600
Houston ATS 650
Transporter 400
Sail Marine 200
UPRR 300 5 ac Lease
Laredo 300
San Antonio 450
El Paso 200
Dallas 1200
<PAGE>
SCHEDULE E
INITIAL RATES
<TABLE>
<CAPTION>
EQUIPMENT TO CALIF. POINTS TO PNW POINTS SECONDARY RATE
SUPPLY POINT (SEE NOTE 1) (SEE NOTE 2) (SEE NOTE 3)
- --------------------- ---------------- ------------- --------------
<S> <C> <C> <C>
ATLANTA, GA 250 350 250
BALTIMORE, MD 350 450 250
BOSTON, MA 350 450 250
CHARLESTON, SC 250 350 250
CHARLOTTE, NC 250 350 250
CHICAGO, IL 250 350 250
CINCINNATI, OH 250 350 250
CLEVELAND, OH 250 350 250
COLUMBUS, OH 250 350 250
DALLAS, TX 250 N/A 250
DENVER, CO 250 250 250
DETROIT, MI 250 350 250
HARRISBURG, PA 350 450 250
HOUSTON, TX 250 N/A 250
INDIANAPOLIS, IN 250 350 250
JACKSONVILLE, FL 250 350 250
KANSAS CITY, MO 250 350 250
LOUISVILLE, KY 250 350 250
MEMPHIS, TN 250 350 250
MIAMI, FL 250 350 250
MINNEAPOLIS, MN 250 350 250
NASHVILLE, TN 250 350 250
NEW ORLEANS, LA 250 350 250
NEW YORK, NY 350 450 250
NEWARK, NJ 250 450 250
NORFORK, VA 350 450 250
OMAHA, NE 250 350 250
ST LOUIS, MO 250 350 250
TAMPA, FL 250 350 250
MONTREAL, CANADA N/A N/A N/A
TORONTO, CANADA N/A N/A N/A
</TABLE>
NOTE 1: APPLIES TO ANY SIZE CONTAINER WHEN LOADED WITH DOMESTIC CARGO TO
POINTS IN CALIFORNIA. APPLIES TO CONTAINERS THAT COMPRISE THE FIRST
66,000 CONTAINERS LOADED TO ALL WEST COAST POINTS ANNUALLY.
NOTE 2: APPLIES TO ANY SIZE CONTAINER WHEN LOADED WITH DOMESTIC CARGO TO
POINTS IN WASHINGTON AND OREGON. APPLIES TO CONTAINERS THAT
COMPRISE THE FIRST 66,000 CONTAINERS LOADED TO ALL WEST COAST
POINTS ANNUALLY.
NOTE 3: APPLIES TO ANY SIZE CONTAINERS WHEN LOADED WITH DOMESTIC CARGO TO
ANY WEST COAST POINT. APPLIES TO CONTAINERS THAT EXCEED 66,000
LOADED ANNUALLY TO WEST COAST POINTS.
23
<PAGE>
Exhibit 4.9
-----------
TPI CHASSIS SUBLET AGREEMENT
THIS CHASSIS SUBLET AGREEMENT (as originally executed and as amended from
time to time in accordance with its terms, "Chassis Sublet") is made as of May
28, 1999, by and among APL Land Transport Services, Inc., a Tennessee
corporation ("LTS"), APL Co. Pte Ltd., a Singapore corporation, APL Limited and
American President Lines, Ltd., a Delaware corporation (collectively, "APL").
RECITALS
WHEREAS, the parties to this Chassis Sublet recognize that there is a need
for twenty foot (C20) chassis, forty foot (C40) and forty-five foot (C45)
chassis to support the business needs of LTS specifically relating to the ocean
containers of LTS' third party international customers ("TPI Containers") which
require chassis for their transportation.
WHEREAS, APL has a supply of chassis which are currently used to fulfill
TPI requirements at various locations, terminals and depots in the United
States.
WHEREAS, LTS and APL are desirous of entering into this Chassis Sublet
whereby APL agrees to provide, on a daily basis, the use of an agreed number of
APL's chassis which provision also includes the maintenance and repair and
licensing of these chassis.
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
As employed in this Chassis Sublet, the term:
1. "Chassis" means a licensed skeletal chassis designed for the carriage of
20', 40' and 45' ISO ocean shipping containers in compliance with
applicable FHWA and DOT regulations.
2. "Day" means any calendar daily twenty-four hour period commencing at 00:01
hours and ending at 24:00.
3. "Force Majeure events" shall include Acts of God (other than ordinary
storms or inclement weather conditions), earthquakes, floods or landslides,
act of governments, riots, insurrections, embargoes, and labor disputes or
strikes or other occurrences which are beyond the reasonable control of the
Parties and which make it impossible for either Party to perform.
4. "Use" means the provision of a Chassis which is available for interchange
in accordance with this Chassis Sublet. It is understood that APL is
providing such Use out of its total fleet of Chassis on a revolving basis
and is not supplying LTS with a specific group of identifiable Chassis.
5. "Per Diem Rate" means the charge assessed by APL for making available to
LTS the number of chassis set forth in Article II below.
6. "User" shall mean the person having responsibility for the Chassis.
<PAGE>
7. Interchange[d], "when used with respect to a chassis means an APL supplied
chassis which has been removed from APL's terminal or depot by LTS, LTS'
designee or a motor carrier having a valid interchange with LTS but not
redelivered to APL's terminal or depot or a chassis which had been removed
and redelivered to APL's terminal or depot.
ARTICLE II - NUMBER OF CHASSIS REQUIRED AND
ADJUSTMENT; RETURN PROVISION
During each year of this Agreement, APL agrees to provide to LTS on a daily
basis the chassis requirements set forth in LTS's TPI Market Plan which shall be
supplied to APL on an annual basis no later than September 30/th/ of the prior
year ("TPI Market Plan Requirement"). If LTS fails to supply its TPI Market Plan
Requirement to APL by September 30/th/, APL shall not be obligated to meet the
proposed TPI Market Plan Requirement for the following year but shall only be
required to continue to provide the Chassis requirements set forth in the then
current year's TPI Market Plan Requirement unless otherwise agreed between APL
and LTS.
The "Initial Allocation" of Chassis for the first year of the Agreement is 2,091
C20 Chassis and 3,367 C40 (or equivalent units). The "Current Allocation" shall
be the fleet of C20 Chassis and C40 Chassis for each subsequent year of the
Agreement based on the TPI Market Plan Requirement. In the event that the
Current Allocation is less than the prior year's allocation, and APL incurs
early termination penalties on Chassis which LTS and APL mutually agree were
required to be leased to fulfill previous TPI Market Plan Requirements, LTS
shall bear the cost of those early termination penalties. At APL's sole option,
to the extent that APL can absorb any Chassis into its own fleet, it will do so.
When the Current Allocation results in an increase in the fleet size, and if,
due to market conditions and non-availability of Chassis, APL is unable to
supply all Chassis in excess of the prior year's allocation, APL shall work with
LTS to obtain as many Chassis as practically and economically possible.
In the event that LTS requests more Chassis in an APL accounting period (as
those periods are established in Appendix 5 to the Equipment Supply Agreement)
than are in the Current Allocation as measured by available Chassis Days, APL
shall supply those Chassis as long as such Chassis are available for use by LTS.
Chassis Days are the number of Chassis in the Current Allocation multiplied by
365 averaged over the twelve (12) APL accounting periods. If LTS' use exceeds
the Current Allocation of Chassis during one APL accounting period, APL shall so
advise LTS. If LTS' use exceeds the Current Allocation for a consecutive second
APL accounting period, then the parties shall discuss remedies to address the
excess use within five (5) days after the receipt of data by LTS for that APL
accounting period. If LTS chooses to increase the Chassis fleet, then APL shall
charge LTS for the supplemental Chassis which APL and LTS agree to add to the
Chassis fleet. If APL supplies less than the Current Allocation of Chassis
during one APL accounting period, LTS shall so advise APL. If APL supplies less
than the Current Allocation for a consecutive second APL accounting period, the
parties shall discuss remedies to address the shortage within five (5) days
after the receipt of data by LTS for that APL accounting period.
The number of Chassis provided at each location covered under this Chassis
Sublet shall be managed on a day to day basis by APL and LTS, in accordance with
the Procedures Manual on Equipment Issues (the "Manual") which APL and LTS shall
jointly develop and implement. The Manual shall address procedures for, among
other things, LTS communicating its anticipated Chassis needs at each location
to APL and APL making such equipment available and communicating such
availability to LTS.
LTS shall have the right to periodically audit APL's records, and APL shall have
the right to audit LTS' records, to the extent necessary to determine compliance
by APL with its Chassis supply obligations under this Chassis Sublet. The
parties acknowledge that any such calculation of available Chassis will entail
the extrapolation of certain data from APL's ETC system.
LTS must return a Chassis utilized under this Agreement to the same rail ramp
from which it was taken.
2
<PAGE>
During each year, LTS may notify APL of its request in writing for additional
Chassis beyond the Current Allocation for that year and APL shall have the
option, but not the obligation, to supply such additional Chassis under this
Chassis Sublet. If APL does not respond to LTS within five (5) working days,
then no additional Chassis will be made available from APL.
All incremental direct costs involved in increasing the fleet, whether pursuant
to the paragraph immediately above or pursuant to an increase in a Future
Allocation, shall be paid by LTS. Such costs are not limited to the pickup and
survey of equipment but also include any increase in daily per diem due to
market conditions which may affect the terms and length of any lease
requirements. APL shall use its best efforts when increasing the fleet pursuant
to LTS' needs to do so in the most economical manner possible consistent with
obtaining equipment of adequate quality.
APL represents and warrants that it has obtained all consents, approvals,
authorizations, waivers and amendments required to be obtained from any third
party under its existing lease agreements and/or other obligations prior to
entering into this Chassis Sublet and the consummation of the transactions
contemplated herein.
ARTICLE III - PER DIEM RENTAL RATE
The per diem rental rate for the provision of maintained and licensed Chassis
under this Agreement shall be according to Schedule 1. APL shall invoice LTS
each APL accounting period for the number of Chassis provided in the Current
Allocation pursuant to Article II by multiplying each unit times the applicable
rate times the number of days that unit is in the TPI chassis fleet in the
accounting period. Payment shall be due within thirty (30) days of receipt of an
invoice.
APL represents and warrants to LTS that the per diem rental rate of $4.85 for
units in the 1999 Plan represents the actual daily chassis cost allocated to LTS
by APL during the fiscal year ended December 25, 1998 and that the number and
mix of chassis contained in the Initial Allocation would allow LTS to
appropriately service TPI volumes of approximately 110,000 shipments in 1999
based on actual 1998 chassis turn times. In the event of any inaccuracy of this
representation, the parties agree to make such adjustments in good faith as are
necessary (i) to correct such inaccuracy and (ii) to compensate the party
prejudiced by such inaccuracy.
ARTICLE IV - INTERCHANGE AND CUSTODY; INSURANCE
APL represents that it is an "Equipment Provider" which is a Party to that
standard Uniform Intermodal Interchange and Facilities Access Agreement
administered by the Intermodal Association of North America ("UIIA Agreement").
In accepting the provision of Chassis under this Chassis Sublet, LTS agrees that
LTS is the User of the Chassis upon interchange of the Chassis to LTS until the
Chassis' return to the custody of APL.
Therefore, simultaneously with the execution of this Chassis Sublet, LTS shall
furnish APL with certificates from insurance companies reasonably acceptable to
APL evidencing liability for bodily injury and property damage with a combined
single limit of not less than $1 million. LTS agrees to defend, hold harmless,
and fully indemnify APL against any and all loss, damage, liability, cost or
expense (including reasonable attorney's fees) suffered or incurred by APL,
arising out of or connected with injuries to or death of any persons or loss of
or damage to any property (including equipment and cargo) arising out of
3
<PAGE>
the use, operation, maintenance performed by or at the direction of LTS,
possession or control of Chassis provided to LTS under this Chassis Sublet while
it is the User of the Chassis. LTS further agrees to defend, indemnify, and hold
APL harmless against any and all loss, damage, liability, cost or expenses
(including reasonable attorney's fees and trip permit dues) arising out of LTS'
failure to comply with any federal or state law or regulation when that failure
arises out of the use, operation, maintenance performed by or at the direction
of LTS, possession or control of Chassis provided to LTS under this Chassis
Sublet while it is the User of the Chassis.
ARTICLE V - DAMAGE AND REPAIRS; CITATIONS
The costs of damage to Chassis while in the possession of LTS are included in
the daily per diem rate charged pursuant to this Agreement, and LTS shall not be
billed for individual repairs. If a Chassis is a Total Loss LTS shall pay the
Casualty Value computed for the Chassis in question in accordance with Appendix
1. A Chassis shall be considered a "Total Loss" in the event it is lost, stolen,
destroyed, or surveyed and found to be more costly to repair than its Casualty
Value.
The parties agree that the condition of an APL Chassis shall be established at
interchange by the use of an Equipment Interchange Receipt (EIR) setting forth
the physical condition of the equipment. Both APL and LTS shall agree on the use
of a non-standard interchange where an EIR is not prepared; alternatively the
parties shall agree on what constitutes presumptive interchange information when
that is an issue.
In the event that a citation for any kind of traffic violation, including
parking citations, is issued while the Chassis is under LTS' control, it shall
be LTS' obligation to pay for the citation and to seek reimbursement from the
underlying motor carrier.
ARTICLE VI - USE TAX
In the event there is any use tax in any applicable jurisdiction levied as a
result of this Chassis Sublet, LTS agrees that it will pay such use tax in
addition to the per diem rental due under Article III.
ARTICLE VII - REVIEW
This Chassis Sublet shall be reviewed every three (3) months by the Parties in
consultation with one another. Issues such as per diem rental rates, adequacy of
the provision, and condition of the Chassis will automatically be reviewed. In
the event either party proposes any changes in this Chassis Sublet in connection
with such review, the other Party shall consider the proposal in good faith. In
the event the Parties cannot agree, they shall utilize the Dispute Resolution
process set forth in Section 6 of the Stacktrain Services Agreement.
ARTICLE VIII - TERM AND TERMINATION
The term of this Chassis Sublet shall have the same term as the Stacktrain
Services Agreement. If this Agreement is terminated prior to twenty-years from
the date hereof, LTS may request APL to assign the leases for all the Chassis
covered under this agreement to LTS and, in such event, APL shall be obligated
to so assign such leases to LTS.
In the event that, at the end of the term of this Chassis Sublet, Chassis
interchanged by APL to LTS have not been returned to APL and the Casualty Values
thereof have not been paid to APL, LTS shall be
4
<PAGE>
charged the applicable per diem charge for each such Chassis until the earlier
of either (a) 180 days from the termination of this Chassis Sublet or (b)
written notification by LTS to APL that such Chassis are lost, stolen or
destroyed. If LTS does not return such Chassis to APL within 180 days from the
termination of this Chassis Sublet or LTS notifies APL that such Chassis is or
are lost, stolen or destroyed, then LTS shall be liable for the Casualty Value
of such Chassis in accordance with Article V and Appendix 1 hereof.
5
<PAGE>
ARTICLE IX - FORCE MAJEURE
If any Party suffers a Force Majeure event, it shall promptly notify all other
Parties of that event, specifying the nature and date of occurrence thereof. The
obligation of each Party to perform hereunder shall be suspended during the
Force Majeure event to the extent such event prevents performance. The Party
suffering the Force Majeure event shall notify the other Parties in writing when
that condition has been eliminated.
If a Force Majeure event has been declared, no per diem rental charges shall be
assessed for the days identified in the written notice of the Force Majeure
event. APL shall inform LTS of the number of Chassis which are per diem rental
free upon either its receipt of the notice of an event of Force Majeure, or its
having given notice to LTS that it is declaring an event of Force Majeure.
ARTICLE X - THIRD PARTY MANAGER
The parties hereby agree that a third party manager or managers may be appointed
by APL at any time within the duration of this Agreement to oversee Chassis
management at any or all locations within North America.
ARTICLE XI - CHASSIS LEASES
LTS may, during the first year of this Agreement, request APL to assign the
leases for all the Chassis covered under this Agreement to LTS and, in such
event, APL shall be obligated to so assign such leases to LTS.
ARTICLE XII - MISCELLANEOUS
A. All notices, demands, requests, and other communications required or
permitted by or provided for in this Chassis Sublet ("Communications") shall be
given in writing to the parties at their respective addressees set forth below,
or at such other address as a party shall designate for itself in writing in
accordance with this Section:
To: APL:
1111 Broadway
Oakland, California 94607
Attn: Timothy J. Windle
Facsimile: (510)272-8932
With a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Steven B. Stokdyk, Esq.
Facsimile: (310) 712-8800
6
<PAGE>
To: APL Land Transport Services, Ltd.
Joshua Harris
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212)261-4102
and
Bruce Spector
c/o Apollo Management, L.P.
1999 Avenue of the Stars, Suite 1910
Los Angeles, California 90067
Facsimile (310)201-4199
With a copy to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 259-6333
B. Communications may be transmitted by (i) personal delivery, (ii) delivery
by messenger, express, or air courier or similar courier, (iii) delivery by
United States first class certified or registered mail, postage prepaid, and
(iv) delivery by facsimile. Except as otherwise provided in this Chassis Sublet,
delivery or service of any Communication shall be deemed effective only upon
receipt; provided, that any Communication received after 5:00 p.m. local time at
place of receipt, or on a day other than a Business Day, shall be deemed
received on the next succeeding Business Day.
C. Except as is otherwise expressly provided in this Chassis Sublet, all
periods of time shall be computed by including Saturdays, Sundays, and holidays.
D. The captions in this Chassis Sublet are for convenience of reference only.
They do not define or limit any of the terms or provisions, or otherwise affect
the construction, of this Chassis Sublet.
E. References in this Chassis Sublet to Articles, Sections, and Appendices are
references to Articles, Sections, and Appendices of this Chassis Sublet, except
as expressly otherwise indicated.
F. This Chassis Sublet shall be binding upon, inure to the benefit of, and be
enforceable by the parties hereto and their respective successors and permitted
assignees.
G. This Chassis Sublet shall be construed and enforced in accordance with and
be governed by the laws of the State of New York.
H. If either party shall fail to perform any of its obligations under this
Chassis Sublet, the other party may, on twenty-five (25) days' notice to the
party so failing to perform, do all acts and make all expenditures necessary to
remedy such failure, and the party so failing to perform, shall within ten (10)
Business Days after demand therefor by the other party, pay to the other party
an amount which is equal to the costs, expense and liabilities incurred by the
other party in doing any such act or making any such expenditure. No party,
however, shall be under any obligation to do any such act or make any such
expenditures, nor
7
<PAGE>
shall the making thereof relieve either party from any of the consequences of
any failure to perform any of its obligations under this Chassis Sublet.
I. In the event a dispute between the parties arises concerning any matter
under this Chassis Sublet, the party claiming the existence of a dispute shall
notify the other party in writing. In the event that such notice is given, the
dispute shall be resolved by the Dispute Resolution process set forth in Section
6 of the Stacktrain Services Agreement.
8
<PAGE>
IN WITNESS WHEREOF, this Chassis Sublet has been executed and delivered as
of the date first above written, by the duly authorized representatives of the
parties hereto.
APL Land Transport Services, Inc.
By: /s/ Ann Fingarette Hasse
________________________________
Title: Assistant Secretary
_____________________________
American President Lines, Ltd.
By: /s/ Timothy J. Windle
________________________________
Title: Assistant Secretary
_____________________________
APL Limited
By: /s/ Timothy J. Rhein
________________________________
Title: President and Chief Executive Officer
_____________________________
APL Co. Pte Ltd.
By: /s/ Frederick M. Sevekow, Jr.
________________________________
Title: Authorized Signature
_____________________________
9
<PAGE>
CHASSIS SUBLET AGREEMENT
APPENDIX 1
SCHEDULE FOR CASUALTY VALUE CALCULATIONS
A. LEASED CHASSIS
For leased equipment and equipment otherwise obtained from third parties, the
Casualty Value shall be the amount required to be paid under the lease or other
arrangement with third parties upon a Total Loss of the Chassis. The party
required to pay the Casualty Value under this Chassis Sublet will pay it within
fifteen (15) business days after date of demand therefor and, if it fails to do
so, shall pay late charges and penalties in accordance with the lease or other
arrangement with the third party.
B. Owned Chassis Agreed Cost (January 1, 1999)
C20 $8,000
C40 $8,000
C45 $8,000
CHE48 $8,800
To determine the Casualty Value for owned Chassis which is a Total Loss, the
Agreed Cost shall be depreciated at five percent (5%) per year and pro rata for
portions of a year from the date of manufacture of the Chassis down to a minimum
of thirty percent (30%) of the Agreed Cost. For purposes of determining Casualty
Value, the cost of the Chassis shall be adjusted annually as of January 1 of
each year to reflect changes in the cost of new Chassis.
10
<PAGE>
SCHEDULE 1
TPI CHASSIS ALLOCATION AND
DAILY PER DIEM RENTAL RATE
Current Allocation
(i) C20 C40 C45 CHE Requirements Daily Rate
1,669 1999 Budget $ 4.85
2,469 1999 Budget $ 4.85
422 MSC Shipping $ 5.30
898 MSC Shipping $ 5.30
- -----------------------------
2,091 3,367
Incremental Requirements
- ------------------------
(i) C20 C40 C45 CHE Requirements Daily Rate
________________________________________
Allocation Reduction
- --------------------
(i) C20 C40 C45 CHE Requirements Daily Rate
________________________________________
11
<PAGE>
Exhibit 4.10
------------
EQUIPMENT SUPPLY AGREEMENT
This Equipment Supply Agreement (as originally executed and as amended from
time to time in accordance with its terms, the "Equipment Supply Agreement") is
made as of May 28, 1999 by and among APL Land Transport Services, Inc., a
Tennessee corporation ("LTS"), APL Co. Pte Ltd., a Singapore corporation, APL
Limited, a Delaware corporation and American President Lines, Ltd., a Delaware
corporation (collectively "APL").
ARTICLE I - DEFINITIONS
As employed in this Equipment Supply Agreement, the term:
1. "Affiliate" has the meaning set forth in the Stock Purchase Agreement.
2. "APL Container" means a container which is owned, leased or otherwise
controlled by APL.
3. "APL Chassis" means a Chassis (as defined in the Chassis Sublet) which is
owned, leased or otherwise controlled by APL.
4. "Available Containers" shall have the meaning set forth in the Stacktrain
Services Agreement.
5. "Casualty Value" has the meaning set forth in Section 3.2
6. "Chassis Sublet" means the TPI Chassis Sublet Agreement, dated of even date
herewith, between APL and LTS.
7. "Interchange[d]," when used with respect to a container means a container
which was removed from APL's terminal or depot by LTS, LTS' designee or a
motor carrier having a valid interchange with LTS but not redelivered to an
APL Equipment Return Location in Appendix 2.
"Interchange[d]," when used with respect to a chassis means an APL supplied
chassis which has been removed from APL's terminal or depot by LTS, LTS'
designee or a motor carrier having a valid interchange with LTS but not
redelivered to APL's terminal or depot or a chassis which had been removed
and redelivered to APL's terminal or depot.
8. "Quarterly Period" refers collectively to each fiscal quarter of APL
beginning with that during which this Equipment Supply Agreement becomes
effective and through and including each subsequent fiscal quarter of APL.
<PAGE>
9. "Stacktrain Services Agreement" means the Stacktrain Services Agreement,
dated of even date herewith, between APL and LTS.
10. "Stock Purchase Agreement" means the Stock Purchase Agreement, dated as of
March 15, 1999, between APL Limited and Coyote Acquisition LLC.
11. "Total Loss" has the meaning set forth in Section 3.2
ARTICLE II - APL DRY CONTAINERS TO BE PROVIDED TO LTS BY APL
Section 2.1. APL Provides Available Containers
A. APL will supply to LTS a quantity of Available Containers of the following
types:
1 20' standard height (8' 6" high) dry container ("D20")
2. 40' standard height (8' 6" high) dry container ("D40")
3. 40' high cube (9' 6" high) dry container ("D40H")
4. 45' high cube (9' 6" high) dry container ("D45H")
B. The Available Containers will be available for pickup at the APL terminals,
rail terminals or depots in the locations listed in Appendix 1. The hours
of operation for these terminals and depots will be supplied by APL to LTS.
C. In addition to the Chassis provided pursuant to the Chassis Sublet
Agreement, APL will supply LTS with an APL Chassis to support those
Available Containers at origin. At destination, APL will supply an APL
Chassis to LTS at West Coast intermodal rail terminals listed on Appendix 4
for arriving Available Containers. The APL Chassis supplied to LTS under
this Section must be promptly returned to APL at the same location,
terminal or depot where they were supplied originally unless otherwise
specifically agreed to by APL.
APL shall also supply to LTS 48' expandable APL chassis but only to the
extent necessary to assure that, in addition to LTS' own fleet of 48' and
53' fixed and expandable Chassis, LTS shall have Chassis in proportionally
the same number as it had for its fleet of 48' Containers as that 48'
Container fleet existed in 1998 ("1998 48' Container Fleet").
D. APL represents that it is an "Equipment Provider" which is a party to that
standard Uniform Intermodal Interchange and Facilities Access Agreement
administered by the Intermodal Association of North America ("UIIA
Agreement"). The Interchange to LTS makes LTS the User (as defined in the
Chassis Sublet) of Interchanged APL Chassis and APL Containers and imposes
upon LTS the liabilities and responsibilities set forth in the Chassis
Sublet as to both APL Containers and APL Chassis.
2
<PAGE>
Section 2.2. Interchanges and Custody
A. APL will send LTS a transaction message via Electronic Data Interchange
("EDI") in all cases where that is feasible, and LTS recognizes that there
are Interchanges and locations when such connectivity is not possible. LTS
shall not refuse to accept information on Interchanged APL Chassis and APL
Containers because it was not sent as an EDI transaction.
B. An Available Container or an APL Chassis will be considered as Interchanged
to LTS when either of the following occurs:
1) When the Available Container or an APL Chassis is removed from APL's
terminal, depot, or rail terminal by LTS, LTS' designee or a motor carrier
having a valid interchange with LTS or
2) When an Available Container or an APL Chassis otherwise comes into LTS'
custody due to any transaction commonly referred to as a "Street Turn"
where a motor carrier has been authorized by APL to reuse a dry container
and to make it an Available Container and LTS is notified by APL through
EDI physical exchange of equipment receipts, notice by facsimile or
otherwise providing LTS with actual notice of the exchange.
Section 2.3. Return Locations, Free Time and Per Diem Rates
A. Once empty after their westbound trip, the Available Containers shall be
returned by LTS at its cost to the Equipment Return Points in Appendix 2.
APL shall be responsible for draying or repositioning the empty containers
from any non-APL Return Equipment Points to APL's ocean terminal, container
yard or other locations.
LTS shall have an average of fourteen (14) free days for all Available
Containers received by LTS on an annual aggregate basis to secure a
Domestic Shipment (as defined in the Stacktrain Services Agreement) for an
Available Container and to make it available to APL at a Return Location.
The free days shall commence from the first 12:01 a.m. from the time the
Available Container is actually interchanged to LTS. For every day or
fraction thereof after the fourteenth day that LTS has possession of an
Available Container, LTS shall be charged $10 per day per Available
Container. LTS shall be invoiced on an annual basis for these charges.
B. For the APL Chassis which are supplied in accordance with Section 2.1(C),
APL will allow an average of seven (7) free days of chassis use on an
annual aggregate basis. The seven free days shall commence from the first
12:01 a.m. that the Chassis is actually interchanged to LTS. For each day
or fraction thereof that an APL Chassis is used by LTS beyond the free
days, LTS shall be charged a per diem rental of $4.85 per APL Chassis. LTS
shall be invoiced on an annual basis for these charges.
3
<PAGE>
APL represents and warrants to LTS that had this Agreement been in effect
during the fiscal year ended December 25, 1998, the audited operating
results of LTS for such period would not have been negatively affected. In
the event of any inaccuracy of this representation, the parties agree to
make such adjustments in good faith to amounts payable under this Agreement
as are necessary (I) to correct such inaccuracy and (ii) to compensate the
party prejudiced by such inaccuracy.
C. The per diem rate shall remain the same for the first five (5) years of
this Agreement. Upon the sixth year of this Agreement, the per diem rate
shall be adjusted on an annual basis when, by mutual agreement of the
Parties, the then current per diem rate is not in line with market rates
for similar equipment.
D. Appendix 3 illustrates the method of calculating the average number of free
days for APL Containers (Total Days Less Awaiting Dispatch) and APL Chassis
(Total Chassis Use Days) and documents the baseline for the allowed free
days. APL shall furnish to LTS a schedule in the same format as Appendix A
for each APL Accounting Period so that LTS can track its use of APL
Containers and APL Chassis.
E. An Available Container or APL Chassis will be considered Interchanged back
to APL when any of the following occurs:
1) When the Available Container or APL Chassis is returned empty to the
Equipment Return Points or
2) When the Available Container or APL Chassis otherwise comes into APL's
custody due to mishandling by an LTS customer.
F. An Available Container or APL Chassis will be in LTS' custody at all times
between the time it is Interchanged to LTS and the time it is Interchanged
back to APL. An Available Container or APL Chassis will be in APL's custody
at all other times. LTS will be responsible to APL for loss or damage to
APL Containers and APL Chassis in LTS' custody to the extent indicated in
Section III, except that APL will have ultimate responsibility for loss or
damage to APL Containers or APL Chassis occurring in APL terminals or
depots or otherwise due to actions of APL affiliates.
ARTICLE III - DAMAGE AND REPAIRS TO CONTAINERS, CHASSIS
Section 3.1. APL Equipment
A. In the event any APL Container used by LTS under this Equipment Supply
Agreement is damaged during the period it is in LTS' custody (unless the
damage occurred in an APL terminal or depot or otherwise through the
actions of an Affiliate of APL); and the estimated cost of repair
(according to survey) exceeds US$100.00, and APL repairs the APL Container,
LTS will be invoiced for and shall pay the actual cost of repair; provided,
if such container is
4
<PAGE>
a Total Loss, LTS shall pay the Casualty Value computed for such container
in accordance with Section 3.2.
B. If, for any reason, LTS repairs or otherwise services an APL Container, and
APL subsequently inspects the APL Container and determines that the repair
is inadequate and that further repair is required, and the total cost of
repair exceeds US$100, then LTS shall pay for any additional costs of
repair.
C. In the event any APL Chassis used by LTS under this Equipment Supply
Agreement is damaged during the period it is in LTS' custody (unless the
damage occurred in an APL terminal or depot or otherwise through the
actions of an APL affiliate) and the estimated cost of repair (according to
survey) exceeds US$ 100.00 and APL repairs such APL Chassis, LTS will be
invoiced for and pay the actual costs of repair; provided. If such chassis
is a Total Loss, LTS shall pay the Casualty Value computed for such chassis
in accordance with Section 3.2.
D. It is assumed that the condition of either an APL Container or an APL
Chassis shall be established at Interchange by the use of an Equipment
Interchange Receipt (EIR) setting forth the physical condition of the
equipment. In the event that no EIR is issued, both APL and LTS shall agree
on the use of a non-standard interchange or shall agree on what constitutes
presumptive interchange information when that is an issue.
Section 3.2. Casualty Value: Total Loss
The "Casualty Value" of a container or chassis shall be calculated in accordance
with Schedule 1. A container or chassis shall be considered a "Total Loss" in
the event it is lost, stolen, destroyed, or surveyed and found to be more costly
to repair than its Casualty Value.
ARTICLE IV - ELECTRONIC DATA INTERCHANGE AND
EQUIPMENT TRACKING AND CONTROL.
A. The Manual will include provisions reasonably acceptable to LTS for
electronic data interchange and equipment tracking and control, to the
extent that existing systems allow for such functions.
ARTICLE V - PAYMENTS
A. Within fifteen (15) days after the end of each Agreement year, APL will
present to LTS an invoice, indicating the total number of units, the
aggregate total days or fraction of days over the aggregate allowed free
days and the amount due to APL by LTS for APL Containers and a similar
invoice for APL Chassis. APL and LTS will confirm the accuracy of the
invoices presented and will formulate a final invoice for the net amount to
be paid. Payment by LTS to APL shall be due within thirty (30) days of
receipt of the original invoice.
5
<PAGE>
B. An invoice for APL Containers and or APL Chassis identified as a Total Loss
will be prepared quarterly.
ARTICLE VI - INSURANCE AND INDEMNITY
A. Simultaneously with the execution of this Equipment Supply Agreement, LTS
shall furnish APL with certificates of insurance evidencing automobile
liability for bodily injury and property damage with a combined single
limit of not less than $1 million. The insurers shall be reasonably
acceptable to APL.
B. LTS agrees to defend, hold harmless and fully indemnify APL against any and
all loss, damage, liability, cost or expense (including reasonable
attorney's fees) suffered or incurred by APL, arising out of or connected
with injuries to or death of any persons or loss of or damage to any
property (including equipment and cargo) arising out of the use, operation,
maintenance performed by or at the direction of LTS, possession or control
of an Interchanged APL Container or APL Chassis after it has been
Interchanged out by APL and before it has been Interchanged back to APL.
LTS further agrees to defend, indemnify and hold APL harmless against any
and all loss, damage, liability, cost or expenses (including reasonable
attorney's fees and trip permit dues) arising out of LTS' failure to comply
with any federal or state law or regulation when that failure arises out of
the use, operation, maintenance performed by or at the direction of LTS,
possession or control of APL Containers or APL Chassis provided to LTS
under this Equipment Supply Agreement.
ARTICLE VII - REVIEW
This Equipment Supply Agreement shall be reviewed annually by the parties in
consultation with one another on or around July 31, 1999 and thereafter, in
January of each year commencing January 2000 (and at lesser intervals as the
parties may agree) with a view toward assessing whether this Equipment Supply
Agreement is achieving the intentions of the parties and whether improvements
are possible. In the event either party proposes any changes in this Equipment
Supply Agreement in connection with such review, the other party shall consider
the proposal in good faith, but shall not be obligated to agree to it. In the
event the parties cannot agree as to any such proposal, it shall be submitted
for Dispute Resolution as provided in Section 6 of the Stacktrain Services
Agreement.
6
<PAGE>
ARTICLE VIII - TERM AND TERMINATION
This Equipment Supply Agreement shall commence on Closing (as defined in the
Stock Purchase Agreement) and shall have the same term as the Stacktrain
Services Agreement.
ARTICLE IX - MISCELLANEOUS
A. All notices, demands, requests and other communications required or
permitted by or provided for in this Equipment Supply Agreement
("Communications") shall be given in writing to the parties at their
respective addresses set forth below, or at such other address as a party
shall designate in writing in accordance with this Section:
To: APL:
1111 Broadway,
Oakland, California 94607
Attn: Timothy J. Windle
Facsimile: (510)272-8932
With a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Steven B. Stokdyk, Esq.
Facsimile: (310) 712-8800
To: APL Land Transport Services, Ltd.
Joshua Harris
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212)261-4102
and
Bruce Spector
c/o Apollo Management, L.P.
1999 Avenue of the Stars, Suite 1910
Los Angeles, California 90067
Facsimile (310)201-4199
7
<PAGE>
With a copy to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212)259-6333
Communications may by transmitted by (i) personal delivery, (ii) delivery by
messenger, express or air courier or similar courier, (iii) delivery by United
States first class certified or registered mail, postage prepaid, and (iv) by
facsimile. Except as otherwise provided in this Equipment Supply Agreement,
delivery or service of any Communication shall be deemed effective only upon
receipt; provided, that any Communication received after 5:00 p. m. local time
at place of receipt, or on a day other than a Business Day, shall be deemed
received on the next succeeding Business Day.
B. Except as is otherwise expressly provided in this Equipment Supply
Agreement, all periods of time shall be computed by including Saturdays,
Sundays and public holidays.
C. The captions and table of contents in this Equipment Supply Agreement are
for convenience of reference only and are not part of this Equipment Supply
Agreement and do not define or limit any of the terms or provisions, or
otherwise affect the construction, of this Equipment Supply Agreement.
D. References in this Equipment Supply Agreement to Articles, Sections and
Appendices are references to Articles, Sections and Appendices of this
Equipment Supply Agreement, except as expressly otherwise indicated.
E. This Equipment Supply Agreement shall be binding upon, inure to the benefit
of, and be enforceable by the parties hereto and their respective
successors and permitted assignees.
F. This Equipment Supply Agreement shall be construed and enforced in
accordance with and be governed by the laws of the State of New York.
G. If any party shall fail to perform any of its obligations under this
Equipment Supply Agreement, the other party may, on twenty-five (25) days'
written notice to the party so failing to perform, do all acts and make all
expenditures necessary to remedy such failure, and the party so failing to
perform, shall within ten (10) Business Days after demand therefor by the
other party, pay to the other party an amount which is equal to the costs,
expense and liabilities incurred by the other party in doing any such act
or making any such expenditure. No party, however, shall be under any
obligation to do any such act or make any such expenditures, nor shall the
making thereof relieve either party from any of the consequences of any
failure to perform any of its obligations under this Equipment Supply
Agreement.
8
<PAGE>
H. In the event a dispute between the parties arises concerning any matter
under this Equipment Supply Agreement, the party claiming the existence of
a dispute shall notify the other party in writing. In the event that such
notice is given, the dispute shall be submitted for Dispute Resolution as
provided in Section 6 of the Stacktrain Services Agreement.
9
<PAGE>
IN WITNESS WHEREOF, this Equipment Supply Agreement has been executed and
delivered as of the date first above written, by the duly authorized
representatives of the parties hereto.
APL LAND TRANSPORT SERVICES, INC.
By: /s/ Ann Fingarette Hasse
________________________________
Title: Assistant Secretary
_____________________________
AMERICAN PRESIDENT LINES, LTD.
By: /s/ Timothy J. Windle
________________________________
Title: Assistant Secretary
_____________________________
APL LIMITED
By: /s/ Timothy J. Rhein
______________________________
Title: President and Chief Executive Officer
______________________________________
APL Co. Pte Ltd.
By: /s/ Frederick M. Sevekow, Jr.
______________________________
Title: Authorized Signature
___________________________
10
<PAGE>
Appendix 1. Supply Points
Atlanta, Georgia
Baltimore, Maryland
Boston, Massachusetts
Charleston, South Carolina
Charlotte, North Carolina
Chicago, Illinois
Cincinnati, Ohio
Cleveland, Ohio
Columbus, Ohio
Dallas, Texas
Denver, Colorado
Detroit, Michigan
Harrisburg, Pennsylvania
Houston, Texas
Indianapolis, Indiana
Jacksonville, Florida
Kansas City, Missouri
Louisville, Kentucky
Memphis, Tennessee
Miami, Florida
Minneapolis, Minnesota
Nashville, Tennessee
New Orleans, Louisiana
New York, New York/Newark, New Jersey
Norfolk, Virginia
Omaha, Nebraska
Saint Louis, Missouri
Tampa, Florida
Non-USA:
Montreal, Canada
Toronto, Canada
11
<PAGE>
Appendix 2. Equipment Return Points-West Coast
SOUTHERN CALIFORNIA
Los Angeles: Becker Yard (CY Yard)
9739 South Alameda Street
Los Angeles, CA 90022
APL Global Gateway South [APL Return Location]
614 Terminal Way
Terminal island, CA 90731
NORTHERN CALIFORNIA
Oakland: APL Middle Harbor Terminal [APL Return Location]
1395 Middle Harbor Road
Oakland, CA 94607
Stockton: Rail Ramp U.P. - Stockton/Lathrop
4527 East Roth Road
Lathrop, CA
Hawk Pacific-Lathrop CY Facility
151 Roth Road
French Camp, CA 95231
PACIFIC NORTHWEST
Portland: Union Pacific Ramp (for repositioning to Seattle)
2745 North Interstate
Portland, OR 97227
Seattle: APL Global Gateway North [APL Return Location]
Terminal 5
3443 West Marginal Way
Seattle, WA 98106
12
<PAGE>
Schedule 1. Schedule for Casualty Value Calculations
A. Leased Equipment
For leased equipment and equipment otherwise obtained from third parties by APL,
the Casualty Value shall be the amount required to be paid under the lease or
applicable agreement with third parties upon a Total Loss of the container. The
party required to pay the Casualty Value under this Equipment Supply Agreement
will pay the Casualty Value to the other party within fifteen (15) business days
after the date of written demand therefor and, if such other party fails to do
so, it shall pay late charges and penalties in accordance with the lease or
applicable agreement with the third party.
B. Owned Equipment
The cost for the various types of equipment, as of January 1, 1999, is as set
forth below ("Agreed Cost"):
D20 $2400
D40 $4400
D40H $4550
D45H $6100
C20 $8000
C40 $8000
C45 $8000
CHE48 $8800
To determine the Casualty Value for equipment owned by APL which suffers a Total
Loss, the Agreed Cost shall be depreciated at five percent (5%) per year and pro
rata for portions of a year from the date of manufacture of the equipment down
to a minimum of thirty percent (30%) of the Agreed Cost. For purposes of
determining Casualty Value, the cost of equipment shall be adjusted annually as
of January 1st of each year to reflect the system average cost of APL's owned
Containers.
Example
A 40' high cube dry van is destroyed and determined to be a Total Loss on
November 1, 1998. The unit was manufactured in September 1994. The Casualty
Value is calculated as follows.
1. Agreed Cost $ 4,550
2. Time from 9/94 to 11/98 4 years, 2 months
3. Depreciation 4 years @ $227 50 = $ 910.00
2 mos. @ ($227,50/12)= $ 37.92
4. Subtract depreciation from
Agreed Value ($947.92)
Casualty Value payable $3,602.08.
13
<PAGE>
Exhibit 4.11
------------
PRIMARY OBLIGATION AND GUARANTY AGREEMENT
THIS PRIMARY OBLIGATION AND GUARANTY AGREEMENT (this "Agreement") is
executed as of March 15, 1999, by Neptune Orient Lines Limited, a Singapore
corporation ("NOL"), in favor of Coyote Acquisition LLC, a Delaware limited
liability company ("Coyote"), and APL Land Transport Services, Inc., a Tennessee
corporation ("LTS").
WHEREAS, APL Limited, a Delaware corporation ("APL"), is a party to a
Stock Purchase Agreement, dated as of March 15, 1999, between APL and Coyote.
WHEREAS, in connection with the Stock Purchase Agreement, APL will
become a party to the following agreements (each as defined in the Stock
Purchase Agreement and, together with the Stock Purchase Agreement, the
"Agreements"):
(1) an Administrative Services Agreement;
(2) an Information Technology Access and License Agreement;
(3) a Stacktrain Services Agreement;
(4) a TPI Chassis Sublet Agreement;
(5) an Equipment Supply Agreement; and
(6) a Stockholders Agreement.
WHEREAS, APL is currently a wholly owned indirect subsidiary of NOL.
WHEREAS, APL or APL Bermuda Pte. Ltd., the sole stockholder of APL,
may issue equity shares of its capital stock to the public with a value in
excess of $25 million such that its shares are listed on a United States or
Singapore national securities exchange or quoted on an interdealer quotation
system (an "IPO").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, NOL hereby agrees with Coyote and LTS as follows:
1. Primary Obligation. Prior to an IPO, (a) NOL hereby agrees that
------------------
it is jointly and severally entitled to
<PAGE>
all of the rights, subject to all of the covenants and liable for all of the
obligations (including, without limitation, indemnity obligations) of APL under
each of the Agreements to which APL is a party as if NOL were a signatory
thereto and (b) Coyote and LTS may proceed directly against NOL to enforce any
of such covenants and obligations.
2. Guaranty. Following an IPO, (a) NOL hereby absolutely,
--------
unconditionally and irrevocably guarantees the payment of any amounts due by APL
to Coyote or LTS under the Agreements (the "Guaranteed Obligations") and (b)
Coyote and LTS shall first exhaust their rights to collect any and all
outstanding Guaranteed Obligations from APL before attempting to collect such
Guaranteed Obligations from NOL so long as the collection efforts against APL,
in the judgment of Coyote or LTS, do not prejudice in any manner the ability of
Coyote and LTS to collect such Guaranteed Obligations from NOL, in which case
Coyote and LTS may proceed directly against NOL.
3. Representations and Warranties. NOL represents and warrants to
------------------------------
Coyote and LTS as follows:
(i) NOL is a corporation duly organized, validly existing and in
good standing under the laws of Singapore. NOL has the requisite corporate
power and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance by NOL of this Agreement has ben duly
authorized by all necessary corporate action on the part of NOL.
(ii) This Agreement constitutes a valid and binding obligation of
NOL, enforceable against NOL in accordance with its terms.
(iii) The execution, delivery and performance of this Agreement by
NOL will not violate or conflict with, or constitute a breach or default
(with or without notice or lapse of time, or both) under (a) the charter
documents of NOL, (b) any law, regulation, order, judgment, or decree
applicable to NOL or (c) any term, condition or provision of any loan or
credit agreement, note, bond, mortgage, indenture, lease, sublease or other
material agreement, commitment, instrument, permit, concession, franchise
or license to which NOL is a party or by which NOL or its assets may be
bound, in each case clause (b) or (c) above, which conflict or violation
would adversely affect the ability of NOL to perform its obligations under
this Agreement.
-2-
<PAGE>
(iv) No authorization, consent, permit, approval or other order of,
declaration to, or registration, qualification, designation or filing with,
any governmental authority is required for or in connection with the
execution, delivery and performance of this Agreement by NOL other than the
approval of the transactions contemplated hereby by the shareholders of NOL
pursuant to an extraordinary general meeting.
4. Bankruptcy. NOL's obligations under this Agreement shall not be
----------
limited by any proceedings filed by or against NOL or APL under any applicable
bankruptcy, insolvency or corporate reorganization law. NOL further agrees that
Coyote and LTS shall be under no obligation to marshall any assets in favor of
or against or in payment of any or all of the Guaranteed Obligations. To the
extent that APL makes a payment or payments to Coyote or LTS which payment or
payments (or any part thereof) is or are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to APL, or
its estate, trustee or receiver or any other party, including, without
limitation, NOL, under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such payment or repayment, the Guaranteed
Obligations, or part thereof which had been paid, reduced or satisfied by such
amount, shall be reinstated and continued in full force and effect as of the
date such initial payment, reduction or satisfaction occurred.
5. Termination. This Agreement shall remain in full force and
-----------
effect until, and terminate only after, the termination of all of the Agreements
and the indefeasible payment in full of the Guaranteed Obligations, it being
understood that this Agreement shall not have been terminated, but shall remain
in full force and effect, if any payment or payments (or any part thereof) made
by APL to Coyote or LTS are subsequently invalidated, declared to be fraudulent
or preferential, set aside and/or required to be repaid to APL, or its estate,
trustee or receiver or any other party, including, without limitation, NOL,
under any bankruptcy, insolvency or corporate reorganization law, state or
federal law, common law or equitable cause, until such payment or payments are
satisfied in full pursuant to this Agreement.
6. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Each of the parties hereto hereby irrevocably
submits in any legal action or proceeding relating to or
-3-
<PAGE>
arising out of this Agreement or any other document relating hereto or delivered
in connection with the transactions contemplated hereby, or for recognition and
enforcement of any judgment in respect thereof, to the exclusive jurisdiction of
the United States District Court for the Southern District of New York and
appellate courts thereof. Each of the parties hereto further (a) consents that
any such action or proceeding may be brought in such court and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; (b) agrees that
service of process in any such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to such party at its address set forth in Section
10.3 of the Stock Purchase Agreement or at such other address of which such
party shall have given notice pursuant thereto; and (c) agrees that nothing
herein shall affect the right to effect service of process in any other manner
permitted by law.
7. Severability. Any provision of this Agreement that is held by a
------------
court of competent jurisdiction to violate applicable law shall be limited or
nullified only to the extent necessary to bring this Agreement within the
requirements of such law.
8. Waiver. This Agreement may not be amended or modified by the
------
express written consent of the parties hereto. Any waiver by the parties of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach thereof or any other provision.
9. No Assignment. Neither of the parties hereto may assign or
-------------
transfer any of its rights or delegate any of its obligations hereunder, whether
by operation of law or otherwise, to any other person or entity without the
prior written consent of the other party hereto. Any purported assignment or
delegation that is made other than in accordance with this Section 9 shall be
void and of no effect. Subject to the foregoing provisions of this Section 9,
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
10. Notices. All notices or other communications to NOL shall be in
-------
writing and shall be given in the same manner and with the same effect as set
forth in Section 10.3
-4-
<PAGE>
of the Stock Purchase Agreement. NOL's address and facsimile number are as set
forth below:
Neptune Orient Lines Limited
456 Alexandra Road
#06-00 NOL Building
Singapore 119962
Attention: Marjorie Wee
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and each of the undersigned hereby represents and warrants that he or
she has been and is, on the date of this Agreement, duly authorized by all
necessary and appropriate action to execute this Agreement.
NEPTUNE ORIENT LINES LIMITED
By: /s/ Cederic Foo
________________________________
Name:
Title:
COYOTE ACQUISITION LLC
By: /s/ Joshua Harris
________________________________
Name: Joshua Harris
Title: Vice President
APL LAND TRANSPORT SERVICES, INC.
By: /s/ Timothy J. Rhein
________________________________
Name: Timothy J. Rhein
Title: President and Chief
Executive Officer
-6-
<PAGE>
Exhibit 4.12
================================================================================
SHAREHOLDERS' AGREEMENT
among
APL LIMITED,
COYOTE ACQUISITION LLC,
COYOTE ACQUISITION II LLC
and
PACER INTERNATIONAL, INC.,
Dated as of May 28, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page No.
<S> <C>
1. Restrictions on Transfer; Permitted Transferees; Pledges..................... 2
2. Notice by Shareholder of Proposed Transfers.................................. 3
3. Offer to Sell Shares......................................................... 3
4. Elections to Purchase Shares................................................. 4
5. Procedures Upon Elections for Less than All of Shares Offered................ 4
6. Closing of Purchase of Shares................................................ 4
7. Disposition by APL of Shares not Purchased by the Company and/or Coyote...... 5
8. Participation Rights......................................................... 5
9. Bring Along Rights........................................................... 6
10. Representations and Warranties............................................... 7
11. Incidental Registration...................................................... 7
12. Expenses..................................................................... 9
13. Holdback Agreements.......................................................... 9
14. Indemnification and Contribution............................................. 9
15. Rule 144 Reporting........................................................... 11
16. Certain Agreements........................................................... 12
17. Confidentiality.............................................................. 12
18. APL Acknowledgement.......................................................... 12
19. General Restriction.......................................................... 12
20. Legends...................................................................... 13
21. Further Assurances........................................................... 13
22. Notices...................................................................... 13
23. Amendment; Termination....................................................... 14
24. General...................................................................... 14
25. Complete Agreement........................................................... 15
</TABLE>
<PAGE>
THIS SHAREHOLDERS' AGREEMENT, dated as of May 28, 1999, among COYOTE
ACQUISITION LLC, a Delaware limited liability company, (together with its
transferees and assignees, "Coyote I"), COYOTE ACQUISITION II LLC, a Delaware
limited liability company, (together with its transferees and assignees, "Coyote
II" and Coyote I and Coyote II jointly, "Coyote"), APL Limited, a Delaware
corporation ("APL"), each of the foregoing, shareholders (the "Shareholders") of
Pacer International, Inc., a Tennessee corporation (the "Company"), and the
Company.
WHEREAS, Coyote and APL have entered into a Stock Purchase Agreement,
dated as of March 15, 1999 (as the same may be amended or supplemented, the
"Purchase Agreement") whereby Coyote will purchase (the "Acquisition") shares of
the outstanding common stock, $.01 par value, of the Company (the "Common
Shares");
WHEREAS, upon consummation of the Acquisition (the "Closing"), each of
Coyote I and Coyote II will be the record and beneficial owner of the number of
Common Shares (the "Coyote Shares") and APL will be the record and beneficial
owner of the number of Common Shares (on a post-split basis) (the "APL Shares")
each as set forth on Exhibit A hereto. The terms "APL Shares" and "Coyote
Shares" shall include any Common Shares now owned or hereinafter acquired by APL
or Coyote, respectively, any securities that may be issued by the Company to APL
or Coyote, respectively, as a result of any stock dividend, stock split or other
distribution, recapitalization, reclassification, reorganization or the like,
and any warrants or options to acquire Common Shares or securities convertible
into Common Shares now owned or hereafter acquired by APL or Coyote,
respectively; and the term "Shares" shall include the Coyote Shares and the APL
Shares;
WHEREAS, the Company, Coyote I, Coyote II and Donald C. Orris, Gerry
Angeli, Robert L. Cross, Gary I. Goldfein, Allen E. Steiner, John W. Hein and
Richard P. Hyland (the foregoing individuals, the "Pacer Management
Shareholders") have entered into a Shareholders' Agreement dated as of May 28,
1999 (the "Management Shareholders' Agreement") governing the Common Shares
which may be issued to the Pacer Management Shareholders in exchange for Series
B Perpetual Participating Exchangeable Preferred Stock of Pacer Logistics, Inc.;
WHEREAS, the Company, Coyote I, Coyote II, BT Capital Investors, L.P.
("BT") and Pacer International Equity Investors, LLC. ("CSFB" and, together with
BT, the "Investors") have entered into a Shareholders' Agreement dated as of May
28, 1999 (the "Investors Shareholders' Agreement") governing the Common Shares
which will be purchased from the Company pursuant to that certain Assignment and
Assumption Agreement, dated as of May 28, 1999, between Coyote I, BT and CSFB;
WHEREAS, APL and Coyote desire to impose certain restrictions on the
disposition and transfer of the APL Shares, to create certain purchase and sale
rights and to create certain registration rights; and
WHEREAS, this Agreement shall become effective upon the Closing.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants
<PAGE>
and agreements contained herein, the parties agree as follows:
1. Restrictions on Transfer; Permitted Transferees; Pledges.
--------------------------------------------------------
(a) APL shall not make, nor suffer to be made, any transfer, sale,
assignment, gift, pledge, mortgage, or other disposition or encumbrance (all of
which are comprised within the word "transfer" as used hereinafter) of all or
any portion of the APL Shares, except that, subject to the further provisions of
Paragraph 1(c) below, each of the following transfers are expressly permitted:
(i) by APL pursuant to a bona fide written purchase offer from another
person (as used herein, the term "person" shall include a natural person,
corporation, partnership, limited liability company, association, company,
trust, joint venture, unincorporated organization or other entity of any
nature whatsoever), after APL shall have first offered the APL Shares to
the Company and Coyote in accordance with the procedures hereinafter set
forth in Paragraphs 2 through 7 below; provided, that no such transfer
--------
shall be permitted prior to the date which is thirty (30) months after the
Closing (it being understood that such thirty (30) month prohibition does
not apply to public sales of APL Shares, after the initial public offering,
pursuant to Rule 144 (subject to the last proviso of this paragraph
1(a)(i)) or pursuant to the incidental registration rights specified in
paragraph 11); and, provided, further, that in no event may such transfer
-------- -------
to a bona fide purchaser be effected if the board of directors of the
Company (the "Board of Directors") determines, that (A) the proposed
transferee is a person who or which, directly or indirectly, (including as
an employee, director, officer, consultant, partner, owner, adviser or
other participant in an entity), engages in the business of the Company, in
any related business or in any other business competitive with the Company
at the time of sale or (B) such transfer would be materially detrimental to
the interests of the Company or any subsidiary thereof; and provided,
--------
further, that this paragraph (i) shall not apply to, and shall not be
-------
interpreted to permit, any sales by APL of APL Shares pursuant to Rule 144
under the Securities Act of 1933, as amended (the "Act), including without
limitation, clause (k) of Rule 144, unless (x) the sale is conducted
through the managing underwriter for the Company's initial public offering
of securities, (y) the underwriter has not advised the Company or such APL
that the sale of all or any portion of such Shares would have a material
adverse effect on the market for the Shares and (z) either (1) Coyote has
sold 33 1/3% of the Shares owned by it immediately following the Closing or
(2) six (6) years have elapsed since the Closing;
(ii) by APL to a Permitted Transferee (as hereinafter defined);
provided, however, that any such Permitted Transferee may thereafter
-------- -------
transfer such APL Shares pursuant to this Paragraph 1(a)(ii) only to
another Permitted Transferee of APL or to APL; and provided, further, that
-------- -------
if the Permitted Transferee is an entity described in clause (i) of the
definition of "Permitted Transferee", then prior to any disposition of such
entity's equity interest in APL, or of any equity interest in such entity
to a person that is not APL or a Permitted Transferee of APL, as
applicable, (in either such event, such entity would cease to be a
Permitted Transferee) such entity shall either (A) transfer all APL Shares
then held by it to APL or a Permitted Transferee thereof, or (B) offer such
APL Shares to the Company or Coyote pursuant to the provisions of
Paragraphs 2 through 7 below on
2
<PAGE>
the terms upon which such APL Shares were originally transferred to such
entity;
(iii) as expressly approved in writing by the Board of Directors (but
subject to any terms or conditions provided by the Board of Directors in
granting any such approval); or
(iv) as otherwise expressly provided herein, including pursuant to the
participation rights specified in Paragraph 8 or the incidental
registration rights specified in Paragraph 11.
(b) For the purposes of the foregoing, a "Permitted Transferee" of
APL shall mean:
(i) any entity in which APL holds, directly or indirectly, a 100%
equity interest or any entity which, directly or indirectly, holds a 100%
equity interest in APL; and
(ii) Coyote or the Company.
(c) Prior to any transfer of any APL Shares to a bona fide purchaser
pursuant to Paragraph 1(a)(i) or to a Permitted Transferee pursuant to Paragraph
1(a)(ii), (i) the transferee of APL Shares shall agree to be bound by and
benefit from, and that such APL Shares shall continue to be subject to, the
terms and provisions of this Agreement as if he, she or it were APL hereunder
and shall enter into a joinder to this Agreement (in the form attached hereto as
Exhibit B) to such effect, and (ii) Coyote and the Company shall receive such
assurances as they may reasonably require to the effect that such transfer does
not violate the Act or applicable state securities laws (including, without
limitation, representations and warranties as to investment intention and an
opinion of counsel).
2. Notice by Shareholder of Proposed Transfers. If at any time APL
-------------------------------------------
proposes to transfer any APL Shares, APL shall, prior to making any transfer of
APL Shares, give written notice (the "Notice") to the Company and Coyote,
specifying (i) the APL Shares to be so transferred (which amount shall not be
less than 100% of the APL Shares), (ii) the method of transfer, (iii) the
identity of the prospective transferee and (iv) in the case of a proposed bona
fide sale pursuant to Paragraph 1(a)(i) above, the terms of the written offer
made by the prospective purchaser, and attaching a true and correct copy of such
bona fide offer.
3. Offer to Sell Shares. In the case of a proposed bona fide sale
--------------------
pursuant to Paragraph 1(a)(i) above, the Notice provided in Paragraph 2 shall
constitute an irrevocable offer by APL to sell such APL Shares to the Company or
Coyote on the terms and at the price specified in this Paragraph 3 (such offer
is hereinafter referred to as the "Offer to Sell," and the APL Shares offered in
the Offer to Sell are hereinafter referred to as the "Offered Shares"). The
Offer to Sell shall be at a price and on other terms (including any deferral of
payment in whole or in part) no less favorable to the Company and Coyote than
the price and other terms offered by the prospective purchaser specified in the
Notice, except that if the proposed sale is to be wholly or partly for
------
consideration other than money (the term "money" being used in this Paragraph 3
to include deferred obligations to pay money), the Offer to Sell shall be at a
price equal to the amount of the net monetary consideration plus the fair market
value (as determined in good faith by the Board of Directors within ten (10)
days after receipt of the Notice by the Company), at the date of the Notice, of
any consideration other than money offered by the prospective purchaser.
3
<PAGE>
4. Elections to Purchase Shares.
----------------------------
(a) The Company shall have the first right and option, for a period
of thirty (30) days after delivery of the Offer to Sell by APL, to accept all or
any portion of the Offered Shares at the purchase price and on the terms stated
in the Offer to Sell by delivery to APL, with a copy to Coyote, of written
notice of its election to purchase (the "Company Election Notice"), specifying
the number of Shares the Company elects to purchase. If the Company does not
elect to purchase all of the Offered Shares, then Coyote shall have the right
and option, for a period of thirty (30) days after the earlier of the expiration
of the 30-day period provided above and receipt of the Company Election Notice
(the "Exercise Period"), within which to elect to purchase all or any portion of
the Offered Shares which were not elected to be purchased by the Company. Such
election to purchase Offered Shares shall be irrevocable.
(b) If Coyote elects to accept the Offer to Sell with respect to the
Offered Shares which were not elected to be purchased by the Company, Coyote
shall provide APL with written notice (the "Coyote Election Notice"), no later
than the last day of the Exercise Period, specifying the maximum number of such
Offered Shares that Coyote elects to purchase. Such election to purchase Offered
Shares shall be irrevocable. Except as provided in Paragraph 5 below, all
elections to purchase Offered Shares in accordance with Paragraph 4(a) and this
Paragraph 4(b) shall be binding on APL.
5. Procedures Upon Elections for Less than All of Shares Offered.
-------------------------------------------------------------
Notwithstanding the provisions of Paragraph 4, in the case of a proposed bona
fide sale by APL pursuant to Paragraph 1(a)(i), elections to purchase the
Offered Shares made by the Company and/or Coyote shall not be binding on APL if
the Company and Coyote do not in the aggregate elect to purchase all of the
Offered Shares. In such event, no sales pursuant to such elections need be made
by APL, and APL may then sell the Offered Shares to the proposed bona fide
purchaser, subject to the provisions of Paragraph 7. Notwithstanding the
foregoing, APL may, by written notice of acceptance to the Company and Coyote
within ten (10) days after the earlier of APL's receipt of an Coyote Election
Notice or expiration of the Exercise Period, waive the requirement that all
Offered Shares be accepted for purchase by the Company and Coyote and elect to
sell to the Company and/or Coyote that part of the Offered Shares for which
elections have been made.
6. Closing of Purchase of Shares. If elections have been made by the
-----------------------------
Company and/or Coyote in the aggregate for all of the Offered Shares (or if the
Company and/or Coyote shall have received from APL a notice of waiver and
acceptance pursuant to Paragraph 5), the Company, Coyote and APL shall mutually
agree on a place, time and date (not more than thirty (30) days nor less than
twenty (20) days after the expiration of the Exercise Period) for a closing of
such purchase and sale. At the closing, APL shall (i) deliver against receipt of
the purchase price therefor by cash or certified or bank cashier's check or wire
transfer of funds, the certificate or certificates representing the APL Shares
each of the Company and Coyote has elected to purchase, properly endorsed for
transfer, with all necessary transfer and documentary stamps affixed, and in a
form such that upon presentation to the Company the APL Shares represented
thereby may be registered in the names of the respective purchasers and (ii) be
deemed to have represented and warranted to such purchaser that (a) the APL
Shares to be sold are beneficially and of record owned by APL free and clear of
all liens, claims, privileges, options, security
4
<PAGE>
interests, rights of first refusal, agreements, limitations or voting rights,
preemptive rights, charges or other encumbrances of any nature (except as
expressly provided by this Agreement) (an "Encumbrance") and (b) the sale and
delivery of the APL Shares by APL as contemplated hereby shall vest in the
purchaser on such date good, valid and marketable title to such APL Shares free
and clear of all Encumbrances (clauses (a) and (b), the "Sale Representations").
7. Disposition by APL of Shares not Purchased by the Company and/or
----------------------------------------------------------------
Coyote. Any APL Shares not purchased by the Company and Coyote pursuant to
- ------
Paragraphs 4 through 6 may be disposed of by APL to the prospective transferee
named in the Notice under Paragraph 2, at a price and on terms not more
favorable to the transferee than those specified in such Notice, but only within
ninety (90) days after the expiration of the Exercise Period; provided, that a
--------
transferee shall, prior to the transfer, execute and deliver to the Company and
Coyote a written joinder to this Agreement and such other assurances as provided
in Paragraph 1(c) hereof. Notwithstanding the foregoing, no such transferee
shall be entitled to the rights set forth in Paragraph 11 under this Agreement.
8. Participation Rights.
--------------------
(a) Coyote shall not transfer, directly or indirectly, other than in
a public offering under Paragraph 11 below, Shares which result in a 25%
Transfer (as defined below), unless the terms and conditions of such sale shall
include an offer to APL to include in the transfer, at the option of APL, a
portion (as determined in accordance with Paragraph 8(c) below) of the APL
Shares at the same price and on the same terms and conditions applicable to the
Shares being transferred by Coyote. For purposes of this Paragraph 8, the term
"25% Transfer" shall mean any transfer of or series of related transfers of
Shares which would result in Coyote having transferred an amount of Shares which
exceeds 25% of the Shares owned by Coyote immediately prior to such transfer or
transfers.
(b) In the event that Coyote receives a bona fide offer or offers
from a third party to purchase, or otherwise determines to transfer, Shares
which purchase or transfer would trigger a 25% Transfer (the "Participation
Offer"), Coyote shall then cause the Participation Offer to be reduced to
writing and shall give APL written notice thereof (the "Participation Notice").
The Participation Notice shall contain a true and correct copy of the
Participation Offer and shall identify the number of Shares with respect to
which Coyote has a bona fide offer or other agreement to sell (the "Designated
Shares"), the total number of Shares which Coyote owns beneficially, the price
per Share at which the sale is proposed to be made and any other material term
or condition of the Participation Offer. APL shall have the right and option,
within fifteen (15) days after the Participation Notice is given to APL (the
"Participation Period") to accept the Participation Offer for the number of
Shares as determined pursuant to Paragraph 8(c) below. If APL desires to
exercise such option, APL shall provide Coyote with written notice, specifying
the number of Shares APL wishes to include in the Participation Offer (a
"Participation Acceptance Notice"), which shall constitute an irrevocable
acceptance of the Participation Offer by APL.
(c) In the event the proposed transferee does not agree to accept and
purchase all of the additional number of Shares specified in the Participation
Acceptance Notice, at the same price and on the same terms and conditions as set
forth in the Participation Notice, APL shall
5
<PAGE>
have the right to sell pursuant to the Participation Offer the number of Shares
(the "Participating Shares") allocated as the lesser of (i) the number of Shares
specified in APL's Participation Acceptance Notice and (ii) a pro rata portion
--- ----
of the number of Shares that such proposed Transferee has agreed to accept and
Purchase on the basis of the respective amounts of Shares then owned by Coyote
and APL.
(d) Coyote shall notify APL at least five (5) business days prior to
the date upon which the transfer of Shares pursuant to this Paragraph 8 shall be
consummated, which notice shall contain the date, time and location of the
closing, and the final number of Participating Shares to be sold by APL. APL
shall deliver at the closing to Coyote the certificate or certificates
representing the number of Participating Shares calculated pursuant to Paragraph
8(c) above, together with a power-of-attorney authorizing Coyote to sell such
Participating Shares pursuant to the terms of the Participation Offer. At the
closing of the transfer of the Designated Shares to the third party pursuant to
the Participation Offer, Coyote shall remit to APL the total sales price of the
Participating Shares of APL sold or otherwise disposed of pursuant thereto.
(e) If at the termination of the Participation Period APL shall not
have accepted the offer contained in the Participation Notice, APL will be
deemed to have waived any and all of its rights under this Paragraph 8 with
respect to the transfer of its Shares to such third party, and Coyote shall have
180 days in which to sell Designated Shares, including the Participating Shares,
to the third party, at a price not less than that contained in the Participation
Notice and on other terms and conditions not less favorable than those set forth
in the Participation Notice.
(f) Notwithstanding any other provision contained in this Paragraph
8, there shall not be any liability on the part of Coyote in the event that the
transfer of Designated Shares, including the Participating Shares, pursuant to
this Paragraph 8 is not consummated for any reason whatsoever. The decision
whether to effect a transfer of Designated Shares, including the Participating
Shares, pursuant to this Paragraph 8 shall be in the sole and absolute
discretion of Coyote.
9. Bring Along Rights. In the event that Coyote shall transfer or
------------------
propose to transfer, directly or indirectly, Shares which, when added to all
previous transfers of Shares by Coyote, would result in a transfer to any person
other than the Company of greater than twenty-five percent (25%) of the number
of Shares outstanding on the date of transfer (a "Significant Transfer"), then
Coyote may require, by written notice to APL (the "Bring-Along Notice"), that
APL transfer an equivalent portion (on the basis of the amount of Shares to be
transferred by Coyote pursuant to the Significant Transfer and the total number
of Coyote Shares owned by Coyote at such time) of APL Shares in the Significant
Transfer on the same terms and conditions contained in the Bring-Along Notice.
The Bring-Along Notice shall contain a true and correct copy of the terms of the
Significant Transfer and shall identify the third party, the number of Coyote
Shares with respect to which Coyote has a bona fide offer, the price per Coyote
Share at which the sale is proposed to be made and all other material terms and
conditions of the Significant Transfer, including the date, time and location of
the closing. The Bring-Along Notice shall be delivered not less than five (5)
business days prior to the closing of the purchase and sale contemplated by this
Paragraph 9. In such event, APL shall deliver at the closing to Coyote the
certificate or certificates representing the APL Shares together with a power-
of-attorney authorizing Coyote to sell such equivalent portion of the APL Shares
pursuant to the
6
<PAGE>
terms of the Bring-Along Notice. APL shall be obligated to pay not more than its
pro rata share (based upon the amount of consideration received for or with
- --- ----
respect to the APL Shares) of reasonable fees and expenses incurred in
connection with such Significant Transfer (as evidenced by reasonable supporting
documentation) to the extent such costs are incurred for the benefit of the
selling Shareholders generally, including, without limitation, fees and expenses
of one law firm, one accounting firm and one financial advisor acting on behalf
of the Company and/or the Shareholders generally, and are not otherwise paid by
the Company or the acquiring party. Costs incurred by or on behalf of a
Shareholder for such Shareholder's sole benefit will not be considered costs of
the transaction hereunder. At the closing of the Significant Transfer, Coyote
shall remit to APL the total sales price (net of APL's pro rata portion of
--- ----
reasonable related expenses as specified above) of the APL Shares sold or
otherwise disposed of pursuant thereto. APL hereby agrees to take all reasonable
actions necessary to consummate the Significant Transfer, including, but not
limited to, the execution of necessary or appropriate agreements, the taking of
any necessary corporate action and the waiving of any dissenters, appraisal or
similar rights.
10. Representations and Warranties.
------------------------------
(a) APL hereby represents and warrants to the Company and Coyote
that, as of the time APL becomes a party to this Agreement, (i) APL is duly
organized, validly existing and in good standing under the laws of Delaware, and
has all requisite corporate power to carry on its business as it is now being
conducted, (ii) the execution, delivery and performance of this Agreement by APL
have been duly authorized by its board of directors, and (iii) this Agreement
has been duly executed and delivered by APL and constitutes the legal, valid and
binding obligation of APL, enforceable against APL in accordance with its terms.
(b) The Company represents and warrants to APL and Coyote that (i)
the Company is duly organized, validly existing and in good standing under the
laws of Tennessee, and has all requisite corporate power to carry on its
business as it is now being conducted, (ii) the execution, delivery and
performance of this Agreement by the Company have been duly authorized by the
Board of Directors, and (iii) this Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
(c) Coyote hereby represents and warrants to the Company and APL that
(i) each of Coyote I and Coyote II is duly organized, validly existing and in
good standing under the laws of Delaware, and has all requisite company power to
carry on its business as it is now being conducted, (ii) each of Coyote I and
Coyote II has the authority to enter into this Agreement and to fully perform
its obligations hereunder, and (iii) this Agreement has been duly executed and
delivered by each of Coyote I and Coyote II and constitutes the legal, valid and
binding obligation of each of Coyote I and Coyote II, enforceable against each
of Coyote I and Coyote II in accordance with its terms.
11. Incidental Registration.
-----------------------
(a) If the Company at any time (other than pursuant to an initial
public offering of the Company's securities) proposes to register any Common
Shares under the Act for sale to the
7
<PAGE>
public, (i) for its own account (except with respect to registration statements
on Forms S-4, S-8 or such other form which is not available for registering
Common Shares for sale to the public) or (ii) for the account of Coyote, each
such time it will give prior written notice to APL of its intention so to do.
Upon the written request of APL, received by the Company within twenty (20) days
after the giving of any such notice by the Company, to register any of its
Common Shares (which request shall state the intended method of disposition
thereof), the Company will use commercially reasonable efforts to cause the
Common Shares as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale by
APL (in accordance with its written request) of such Common Shares so
registered. Alternatively, the Company may in its sole discretion include such
Common Shares in a separate registration statement to be filed concurrently with
the registration statement for the securities to be filed by the Company for its
own account or for the account of Coyote. In the event that any registration of
Common Shares for the account of the Company pursuant to this Paragraph 11 shall
be, in whole or in part, an underwritten public offering of Common Shares, the
number of Common Shares owned by APL and Coyote to be included in such an
underwriting may be reduced (pro rata among APL, Coyote and other persons with
pari passu incidental registration rights, as may be applicable, based upon the
number of Shares owned by APL, Coyote and such other persons) due to underwriter
market limitations if, and to the extent, that the managing underwriter advises
the Company that in its opinion such inclusion would adversely affect the
marketing of the securities to be sold by the Company therein. In addition, if
the managing underwriter so advises, for any reason, against the inclusion of
all or any portion of Common Shares owned by APL in the public offering, then
APL shall only have the right to register Common Shares therein as so advised by
the managing underwriter. It is acknowledged by the parties hereto that the
rights of APL to include Common Shares in a registration shall be subordinate to
those of the Company and, except as expressly provided herein, on a parity with
Coyote or other person selling Common Shares for its own account so that, except
as expressly provided herein, cut backs shall be made on a pro rata basis based
on the number of Common Shares held by each such person. Except as set forth
above, there shall be no limit to the number of registrations that may be
requested pursuant to this Paragraph 11.
(b) In connection with each registration pursuant to Paragraph 11(a)
covering an underwritten public offering pursuant to which APL sells Common
Shares, APL agrees to (i) enter into a written agreement with the managing
underwriter under the same terms and conditions as apply to the Company or the
selling shareholders, as applicable, and (ii) furnish to the Company in writing
such information with respect to APL and the proposed distribution by APL as
reasonably shall be necessary and shall be requested by the Company in order to
comply with federal and applicable state securities laws.
(c) If, at any time after giving notice of its intention to register
any Common Shares pursuant to this Paragraph 11 and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Common Shares, the
Company shall give written notice to APL and, thereupon, shall be relieved of
its obligation to register any APL Shares in connection with such registration.
8
<PAGE>
(d) The APL Shares shall cease to be registrable pursuant to this
Paragraph 11 on the date upon which they are effectively registered under the
Act and disposed of in accordance with any registration statement covering it.
12. Expenses. All expenses incurred by the Company in complying with
--------
Paragraph 11, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for APL if it sells Common Shares, but excluding
any Selling Expenses, are herein referred to as "Registration Expenses."
"Selling Expenses" as used herein mean all underwriting discounts and selling
commissions applicable to the sale of APL Shares.
The Company will pay all Registration Expenses in connection with each
registration statement under Paragraph 11. All Selling Expenses in connection
with each registration statement under Paragraph 11 shall be borne by APL.
13. Holdback Agreements. Notwithstanding any other provision hereof,
-------------------
except as otherwise may be agreed in writing by the parties hereto concurrently
or subsequent to this Agreement, with respect to each and every public offering,
each Shareholder agrees not to offer, sell or otherwise transfer any Shares
(except for Shares sold (a) in such public offering or (b) to a Permitted
Transferee) during the black-out period prior to the effective date of the
applicable registration statement or other offering document as advised by
counsel for the Company and during the period after such effective date not to
exceed six (6) months.
14. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any APL Shares under the Act
pursuant to Paragraph 11, the Company will indemnify and hold harmless, to the
full extent permitted by law, APL, each underwriter of such Shares thereunder
and each other person, if any, who controls APL or such underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages, liabilities and expenses,
joint or several, to which APL, such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which APL Shares were registered
under the Act pursuant to Paragraph 11, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will pay or reimburse APL, each such underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company (i) will not be
-------- -------
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information pertaining to APL and furnished by APL, any such
9
<PAGE>
underwriter or any such controlling person, as the case may be, in writing
specifically for use in such registration statement, prospectus, amendment or
supplement and (ii) will not be liable for amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company, such consent not to be unreasonably withheld
or delayed.
(b) In the event of a registration of any Common Shares under the Act
pursuant to Paragraph 11, APL will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of the Act, each
officer of the Company who signs the registration statement, each director of
the Company, each underwriter and each person who controls any underwriter
within the meaning of the Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the Act or otherwise,
but only insofar as such losses, claims, damages or liabilities (or actions in
respect thereof), arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, made in reliance upon and in conformity with information
pertaining to APL, as such, furnished in writing to the Company by APL
specifically for use in such registration statement under which APL Shares were
registered under the Act pursuant to Paragraph 11, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, and
will pay or reimburse the Company and each such officer, director, underwriter
and controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the liability of APL hereunder
-------- -------
shall be limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the public offering price of the
Common Shares sold by APL under such registration statement bears to the total
public offering price of all securities sold thereunder, but not in any event to
exceed the net proceeds received by APL from the sale of Common Shares covered
by such registration statements and (ii) APL shall not be liable for amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of APL, such consent not to be
unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Paragraph 14 and shall only relieve it from any liability which
it may have to such indemnified party under this Paragraph 14 if and to the
extent the indemnifying party is materially prejudiced by such omission. In case
any such action shall be brought against any indemnified party and the
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Paragraph 14 for any legal or other
professional expenses subsequently incurred by such indemnified party in
connection with the defense thereof other
10
<PAGE>
than reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that if the defendants in any such action include both the
- -------- -------
indemnified party and the indemnifying party, and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable fees and expenses of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party, in the defense of any such claim or litigation against an
indemnified party, shall consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation, unless such indemnified party
shall otherwise consent in writing. An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim.
(d) In order to provide for just and equitable contribution in any
case in which either (i) APL exercises incidental registration rights under
Paragraph 11 of this Agreement, or any controlling person of APL makes a claim
for indemnification pursuant to this Paragraph 14 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and following the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such
case, notwithstanding the fact that this Paragraph 14 provides for
indemnification in such case, or (ii) contribution under the Act may be required
on the part of APL or any such controlling person in circumstances for which
indemnification is provided under this Paragraph 14; then, and in each such
case, the Company and APL shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect both the relative
benefit received by APL and the relative fault of the Company and APL; provided,
--------
however, that, in any such case, (A) APL shall not be required to contribute any
- -------
amount in excess of the public offering price of all APL Shares offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation. For purposes of the preceding sentence, the
relative benefit received by APL shall be deemed to be in the same proportion as
the public offering price of APL Shares offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement; and the relative fault of the Company and such
Shareholder shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission of a material
fact relates to information supplied by the Company or by APL and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
15. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Securities and Exchange Commission (the
"Commission") which may at any time permit the sale of the Common Shares to the
public without registration, at all times after any registration statement
covering a public offering of securities of the Company
11
<PAGE>
under the Act shall have become effective, the Company agrees to use all
reasonable efforts to: (a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act; (b) use all
reasonable efforts to file with the Commission in a timely manner all reports
and other documents required of the Company under the Act and the Exchange Act;
and (c) furnish to each Shareholder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of such Rule
144 and of the Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such Shareholder may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Shareholder to sell any
Common Shares without registration.
16. Certain Agreements.
------------------
(a) The Company agrees that any transactions between itself and any
Affiliate shall (i) be on terms not materially less favorable to the Company
than those that would have been obtained in an arm's-length transaction with a
non-Affiliate as determined in good faith by the Board of Directors in their
reasonable business judgment or (ii) be approved by a majority of the Board of
Directors who are not Affiliates of such person other than a director of officer
of the Company who is not otherwise an Affiliate of such person.
Notwithstanding the foregoing, the parties agree that all amounts payable to
Apollo Management, L.P. ("Apollo") pursuant to the terms and provisions of that
certain Management Agreement of even date herewith between the Company and
Apollo (the "Management Agreement") (as it may be extended) shall be
specifically excluded from the foregoing limitations on Affiliate transactions;
provided, that the fees set forth in such Management Agreement may not be
- --------
increased unless approved in accordance with the first sentence of this
Paragraph 16(a).
(b) APL will not sell any APL Shares except in compliance with this
Agreement.
17. Confidentiality.
---------------
(a) During the term of this Agreement and at all times thereafter,
APL agrees that it will not divulge to anyone (other than the Company or any
persons employed or designated by the Company) any confidential knowledge or
information relating to the business of the Company or any of its subsidiaries
or affiliates, including, without limitation, all types of trade secrets (unless
readily ascertainable from public or published information or trade sources),
product design and customer and supplier information. APL further agrees not to
disclose, publish or make use of any such knowledge or information for personal
purposes or for the benefit of any person, firm, corporation or other entity
(other than the Company or any persons employed or designated by the Company)
without the prior written consent of the Company.
18. APL Acknowledgement. APL acknowledges and agrees with the terms
-------------------
of the Management Shareholders' Agreement and the Investors Shareholders'
Agreement and the rights given to, and obligations imposed upon, the parties
thereto.
19. General Restriction. Each of APL and Coyote understand and agree
-------------------
that (a) the Common Shares retained or received pursuant to the Purchase
Agreement have not been
12
<PAGE>
registered under the Securities Act and are restricted securities; (b) it will
not, directly or indirectly, sell, assign, transfer, grant a participation in,
pledge or otherwise dispose of any Common Shares (or solicit any offers to buy
or otherwise acquire, or take a pledge of any Common Shares) except in
compliance with the Securities Act and the terms and conditions of this
Agreement; and (c) any attempt to transfer any Common Shares not in compliance
with this Agreement shall be null and void and the Company shall not, and shall
cause any transfer agent not to, give any effect in the Company's records to
such attempted transfer.
20. Legends.
-------
(a) In addition to any other legend that may be required, each
certificate for Common Shares that is issued to APL shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH.
THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE SHAREHOLDERS' AGREEMENT DATED
AS OF MAY 28, 1999, COPIES OF WHICH MAY BE OBTAINED UPON
REQUEST FROM PACER INTERNATIONAL, INC. OR ANY SUCCESSOR
THERETO."
(b) If any Common Shares shall become registered under the Securities
Act, the Company shall, upon the written request of the holder thereof, issue to
such holder a new certificate evidencing such shares without the first sentence
of the legend required by Paragraph 20(a) endorsed thereon. If any Common Shares
cease to be subject to any and all restrictions on transfer set forth in this
Agreement, the Company shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such Common Security without
the second sentence of the legend required by Paragraph 20(a) endorsed thereon.
21. Further Assurances. The parties hereto agree to execute and
------------------
deliver all such further instruments as may be necessary from time to time to
carry out the provisions of this Agreement.
22. Notices. All offers, acceptance, notices, certificates and other
-------
communications provided for in this Agreement shall be in writing and (except as
otherwise provided in this Agreement) shall be deemed to have been given when
(a) sent by facsimile transmission, (b) sent by a nationally known overnight
delivery service, (c) delivered by hand or (d) mailed by first-class registered
or certified mail in a post-paid envelope, in each case addressed to the
respective persons to be notified as follows: in the case of Coyote, c/o Apollo
Management, L.P., 1301 Avenue of the Americas, 38th Floor, New York, NY 10019;
Attention: Joshua J. Harris, with a copy to, Michael Weiner, Esq., Apollo
Management, L.P., 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067,
and with a copy to, Morton A. Pierce, Esq./Douglas L. Getter, Esq., Dewey
Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019; in the
case of APL, American President Lines, Ltd., 1111 Broadway, Oakland, CA 94607,
Attention: Timothy J. Windle, Esq., with a copy to, Steven B. Stokdyk,
13
<PAGE>
Esq., Sullivan & Cromwell, 1888 Century Park East, Los Angeles, CA 90067 and in
the case of the Company, Pacer International, Inc., 3746 Mt. Diablo Blvd., Suite
110, Lafayette, CA 94549, or at such other address as the party to be notified
shall from time to time have furnished to the other parties in writing.
23. Amendment; Termination. No provision of this Agreement may be
----------------------
waived except by an instrument in writing executed by the party against whom the
waiver is to be effective. This Agreement may be amended only by an instrument
executed by the parties hereto or by their successors and assigns. Except with
respect to Paragraphs 14, 17, 18, 19, 20 and Paragraphs 22 through 25 this
Agreement shall terminate automatically upon the earlier of (i) the tenth
anniversary of the date hereof and (ii) at such time as the Company shall be a
Public Company (as defined below) and Coyote shall have sold in the aggregate
pursuant to one or more public offerings, fifty percent (50%) of the total
number of Coyote Shares owned by them at the Closing. For the purposes of the
foregoing provision, the term "Public Company" means a corporation with one or
more classes of equity securities listed on a national securities exchange or
publicly traded in the over the counter market.
24. General.
-------
(a) This Agreement (i) shall be construed and enforced in accordance
with the laws of the State of New York, (ii) shall bind and inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and assigns and (iii) may be executed in
two or more counterparts each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(b) The parties hereto hereby consent and agree that they shall
commence any action with respect to any claims or disputes between the parties
hereto pertaining to this Agreement or to any matter arising out of or related
to this Agreement in the United States District Court for the Southern District
of New York, so long as the action falls within the subject matter jurisdiction
of such court; in the event any such action shall be determined by the court to
be outside its subject matter jurisdiction, then the parties agree to commence
any such action in the Supreme Court of New York County, New York and to take
such action as may be necessary to effect assignment of such action to the
Commercial Part of that court. The parties hereto expressly submit and consent
in advance to such jurisdiction in any action or suit commenced in any such
court, and hereby waive any objection which it may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby consent
to the granting for such legal or equitable relief as is deemed appropriate by
such court. Each party hereto irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address given in
accordance herewith.
(c) The parties hereto acknowledge that irreparable damage would
result if this Agreement is not specifically enforced and that, therefore, the
rights and obligations of the parties under this Agreement may be enforced by a
decree of specific performance issued by a court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith without the necessity of posting any bond. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise. This
Agreement may be executed
14
<PAGE>
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(d) The restrictions with respect to APL Shares set forth herein
shall be in addition to and shall in no way limit any other restrictions on the
APL Shares set forth in any other agreement.
(e) The section and other headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) To the extent that any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect. In furtherance and not in limitation of the
foregoing, if any provision, term, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, then such provision, term,
covenant or restriction shall be construed to cover only that duration, extent
or activities which may be validly and enforceably covered and the remainder of
the provisions, terms covenants and restrictions contained herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
25. Complete Agreement. This Agreement, the Management Shareholders'
------------------
Agreement, the Investors Shareholders' Agreement and the Exhibits attached
hereto and which are hereby incorporated by reference herein, contains the
entire agreement among the parties, superseding all prior agreements whether
oral or written between parties with respect to the subject matter hereof. APL
shall not enter into any Shareholder agreements or arrangements of any kind with
any person with respect to any Shares on terms inconsistent with the provisions
of this Agreement (whether or not such agreements or arrangements are with
persons that are not parties to this Agreement), including agreements or
arrangements with respect to the acquisition or disposition of Shares in a
manner which is inconsistent with this Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and the year first above written.
PACER INTERNATIONAL, INC.
By: /s/ Donald C. Orris
________________________________
Donald C. Orris
President and Chief Executive Officer
COYOTE ACQUISITION LLC
By: /s/ Marc Becker
________________________________
Marc Becker
Vice President
COYOTE ACQUISITION II LLC
By: /s/ Marc Becker
________________________________
Marc Becker
Vice President
APL LIMITED
By: /s/ Timothy J. Windle
________________________________
Timothy J. Windle
Assistant Secretary
<PAGE>
Exhibit A
---------
Name # of Common Shares (On a Post-Split Basis)
- ---- -----------------------------------------
APL Limited 750,000
Coyote Acquisition LLC 8,912,000
Coyote Acquisition II LLC 478,000
<PAGE>
Exhibit B
---------
JOINDER IN
----------
SHAREHOLDERS' AGREEMENT
-----------------------
In consideration of the transfer to (him) (her) (it) of _____ shares
of common stock, $.01 par value, of Pacer International, Inc. (the "Company")
and the registration of such transfer on the books of the Company, ____________,
a __________ ("Additional Shareholder"), and the Company agree that, as of the
date written below, Additional Shareholder shall become a party to that certain
Shareholders' Agreement, dated as of May 28, 1999, among the Company, Coyote
Acquisition LLC, a Delaware limited liability company, Coyote Acquisition II
LLC, a Delaware limited liability company, and APL Limited, a Delaware
corporation (the "Shareholders' Agreement"), and shall be bound by all of the
terms and provisions of the Shareholders' Agreement, as though (he) (she) (it)
was an original party thereto and was included in the definition of "APL" as
used therein; provided, that an Additional Shareholder shall not be entitled to
the rights set forth in Paragraph 11 of the Shareholders Agreement.
Executed as of the _____ day of ________________, ____.
[ ]
By:________________________________
Name:
Title:
<PAGE>
Exhibit 4.13
================================================================================
SHAREHOLDERS' AGREEMENT
among
PACER INTERNATIONAL, INC.,
COYOTE ACQUISITION LLC,
COYOTE ACQUISITION II LLC
and
Certain Individual Shareholders
named herein.
Dated as of May 28, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page No.
<S> <C>
1. Restrictions on Transfer; Permitted Transferees; Pledges........................................... 2
2. Notice by Shareholder of Proposed Transfers........................................................ 4
3. Offer to Sell Shares............................................................................... 4
4. Elections to Purchase Shares....................................................................... 5
5. Procedures Upon Elections for Less than All of Shares Offered...................................... 5
6. Closing of Purchase of Shares...................................................................... 6
7. Disposition by Management Shareholder of Shares not Purchased by the Company and/or the Offerees... 6
8. Participation Rights............................................................................... 7
9. Bring Along Rights................................................................................. 8
10. Representations and Warranties..................................................................... 9
11. Incidental Registration............................................................................ 10
12. Expenses........................................................................................... 11
13. Holdback Agreements................................................................................ 11
14. Indemnification and Contribution................................................................... 11
15. Rule 144 Reporting................................................................................. 14
16. Preemptive Rights.................................................................................. 14
17. Certain Agreements................................................................................. 16
18. Confidentiality; Noncompetition.................................................................... 17
19. Voting Proxy....................................................................................... 18
20. Financial Statements............................................................................... 19
21. General Restriction................................................................................ 19
22. Legends............................................................................................ 19
23. Further Assurances................................................................................. 20
24. Notices............................................................................................ 20
25. Amendment; Termination............................................................................. 20
26. General............................................................................................ 21
27. Corporate Agreement................................................................................ 22
</TABLE>
<PAGE>
THIS SHAREHOLDERS' AGREEMENT, dated as of May 28, 1999, is among
COYOTE ACQUISITION LLC, a Delaware limited liability company (together with its
transferees and assignees, "Coyote I"), COYOTE ACQUISITION II LLC, a Delaware
limited liability company, (together with its transferees and assignees, "Coyote
II" and Coyote I and Coyote II, jointly "Coyote"), DONALD C. ORRIS, an
individual, GERRY ANGELI, an individual, ROBERT L. CROSS, an individual, JOHN W.
HEIN, an individual, RICHARD HYLAND, an individual, GARY L. GOLDFEIN, an
individual, ALLEN E. STEINER, an individual (the foregoing individuals, herein
sometimes individually referred to as a "Management Shareholder" and,
collectively, as the "Management "Shareholders"), all of the foregoing,
shareholders (the "Shareholders") of PACER INTERNATIONAL, INC., a Tennessee
corporation (the "Company"), and the Company.
WHEREAS, Coyote and APL Limited, a Delaware Corporation ("APL") have
entered into a Stock Purchase Agreement of even date herewith (as the same may
be amended or supplemented, the "Purchase Agreement") whereby Coyote will
purchase (the "Recapitalization") approximately ninety percent (90%) of the
outstanding shares of common stock, no par value, of the Company (the "Common
Shares");
WHEREAS, upon consummation of the Recapitalization (the "Closing"),
Coyote will be the record and beneficial owner of the number of Common Shares
(the "Coyote Shares") (to the extent the right to purchase such shares has not
been assigned to a third party by Coyote) and APL will be the record and
beneficial owner of the number of Common Shares (the "APL Shares") each as set
forth in the Purchase Agreement;
WHEREAS, APL, Coyote and the Company have entered into a Shareholders
Agreement, dated as of the date hereof (the "APL Shareholders' Agreement"), to
impose certain restrictions on the disposition and transfer of the APL Shares,
to create certain purchase and sale rights and to create certain registration
rights;
WHEREAS, Coyote, the Company, BT Capital Investors, L.P. and Pacer
International Equity Investors, LLC. have entered into a Shareholders Agreement,
dated as of the date hereof (the "Investors Shareholders' Agreement"), to impose
certain restrictions on the disposition and transfer of the APL Shares, to
create certain purchase and sale rights and to create certain registration
rights;
WHEREAS, Mile High Acquisition Corp., a Delaware corporation ("Sub"),
Pacer International, Inc., a Delaware corporation ("Pacer"), and the
shareholders of Pacer have entered into an Agreement and Plan of Merger, dated
as of February 22, 1999 (as the same may be amended or supplemented, the "Merger
Agreement"), providing for the merger of Sub with and into Pacer (the "Merger");
WHEREAS, Sub has assigned (the "Assignment") its rights and
obligations under the Merger Agreement to a newly formed subsidiary of the
Company ("Newco");
WHEREAS, pursuant to the Alternative Consideration Letter, dated March
15, 1999 (the "Alternative Consideration Letter"), as a result of the
Assignment, in lieu of receiving shares of common stock, par value $.01 per
share, of Pacer and New Options (as defined in the
<PAGE>
Merger Agreement) upon the consummation of the Merger (the "Effective Time"),
the Management Shareholders will be issued Series B Perpetual Participating
Exchangeable Preferred Stock (the "Exchangeable Preferred Stock") which may be
exchanged for Common Shares and options which are exercisable for Common Shares
(the "Management Options"), each in amounts as set forth in the Alternative
Consideration Letter (the Common Shares into which the Exchangeable Preferred
Stock may be exchanged and the Management Options, collectively, the "Management
Shares"). The terms "Management Shares" and "Coyote Shares" shall include any
Common Shares and Management Options now owned or hereinafter acquired by any
Management Shareholder or Coyote, respectively, any securities that may be
issued by the Company to any Management Shareholder or Coyote, respectively, as
a result of any stock dividend, stock split or other distribution,
recapitalization, reclassification, reorganization or the like, and any warrants
or options to acquire Common Shares or securities convertible into Common Shares
now owned or hereafter acquired by any Management Shareholder or Coyote,
respectively; and the term "Shares" shall include the Coyote Shares, the
Management Shares and any and all other capital stock or equity securities
(including derivative securities convertible thereinto or exchangeable or
exercisable therefor) issued by the Company;
WHEREAS, it is desired that the Management Shareholders have an
opportunity to participate in the success of the Company, but it is recognized
that the success of the Company might be diminished if the Management Shares
were transferred to persons who might impair the continuation of harmonious
relations among the shareholders of the Company; and
WHEREAS, the Management Shareholders and Coyote desire to impose
certain restrictions on the disposition and transfer of the Management Shares,
to create certain purchase and sale rights, to create certain registration
rights and to agree with respect to certain matters relating to the voting of
the Management Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Restrictions on Transfer; Permitted Transferees; Pledges.
--------------------------------------------------------
(a) No Management Shareholder shall make, or suffer to be made, any
transfer, sale, assignment, gift, pledge, mortgage, or other disposition or
encumbrance (all of which are comprised within the word "transfer" as used
hereinafter) of all or any portion of the Management Shares now owned or
hereafter acquired by such Management Shareholder, except that, subject to the
further provisions of Paragraph 1(c) below, each of the following transfers are
expressly permitted:
(i) by any Management Shareholder pursuant to a bona fide written
purchase offer from another person (as used herein, the term "person" shall
include a natural person, corporation, partnership, association, company,
trust, joint venture, unincorporated organization or other entity of any
nature whatsoever), after the Management Shareholder shall have first
offered the Management Shares to Coyote and each other Management
Shareholder in accordance with the procedures hereinafter set forth in
Paragraphs 2 through 7 below; provided, that no such transfer shall be
--------
permitted prior to the date which is thirty (30) months after the Effective
Time ( it being understood
2
<PAGE>
that such thirty (30) month prohibition does not apply to public sales of
Management Shares, after the initial public offering, pursuant to Rule 144
(subject to the last proviso of this paragraph 1(a)(i)) or pursuant to the
incidental registration rights specified in paragraph 11); and, provided,
--------
further, that in no event may such transfer to a bona fide purchaser be
-------
effected if the board of directors of the Company (the "Board of
Directors") determines, that (A) the proposed transferee is a person who or
which, directly or indirectly, (including as an employee, director,
officer, consultant, partner, owner, adviser or other participant in an
entity), engages in the business of the corporation, in any related
business or in any other business competitive with the Company or any
subsidiary thereof at the time of sale or (B) such transfer would be
detrimental to the interests of the Company or any subsidiary thereof; and
provided, further, that this paragraph (i) shall not apply to, and shall
-------- -------
not be interpreted to permit, any sales by the Management Shareholders of
Management Shares pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Act"), including without limitation, clause (k) of Rule 144,
unless (x) the sale is conducted through the managing underwriter for the
Company's initial public offering of securities, (y) the underwriter has
not advised the Company or such Management Shareholder that the sale of all
or any portion of such Shares would have a material adverse effect on the
market for the Shares and (z) either (1) Coyote has sold 33-1/3% of the
Shares owned by them immediately following the Effective Time or (2) six
(6) years have elapsed since the Effective Time;
(ii) by any Management Shareholder to a Permitted Transferee (as
hereinafter defined); provided, however, that any such Permitted Transferee
-------- -------
may thereafter transfer such Management Shares pursuant to this Paragraph
1(a)(ii) only to any other Permitted Transferee of the Management
Shareholder who originally owned such Management Shares or to such original
Management Shareholder; and provided, further, that if the Permitted
-------- -------
Transferee is an entity described in clause (iv) of the definition of
"Permitted Transferee", then prior to any disposition of any equity
interest in such entity to a person that is not the original Management
Shareholder or a Permitted Transferee of such original Management
Shareholder (in which event, such entity would cease to be a Permitted
Transferee) such entity shall either (A) transfer all Management Shares
then held by it to the original Management Shareholder or a Permitted
Transferee thereof, or (B) offer such Management Shares to the Company,
Coyote and the other Management Shareholders pursuant to the provisions of
Paragraphs 2 through 7 below on the terms upon which such Management Shares
were originally transferred to such entity;
(iii) as expressly approved by Coyote (but subject to any terms or
conditions provided by Coyote in granting any such approval); or
(iv) as otherwise expressly provided herein, including pursuant to the
participation rights specified in Paragraph 8 or the incidental
registration rights specified in Paragraph 11.
(b) For the purposes of the foregoing, a "Permitted Transferee" of
any Management Shareholder shall mean:
(i) the heirs, executor, administrator or personal representative of
such
3
<PAGE>
Management Shareholder, upon the death of any such Management Shareholder;
(ii) the spouse, sibling, parent, child or grandchild of such
Management Shareholder who is a natural person;
(iii) a trust for the exclusive benefit of such Management Shareholder
and any of the family members listed in clause (ii) above;
(iv) any entity in which such Management Shareholder holds a 100% equity
interest; and
(v) Coyote or the Company;
provided, however, that Gary I. Goldfein ("Goldfein") and his Permitted
Transferees shall be deemed to be "Permitted Transferees" of Allen E. Steiner
("Steiner").
(c) Prior to any transfer of any Management Shares to a bona fide
purchaser pursuant to Paragraph 1(a)(i) or to a Permitted Transferee pursuant to
Paragraph 1(a)(ii), (i) the transferee of Management Shares shall agree to be
bound by and benefit from, and that such Management Shares shall continue to be
subject to, the terms and provisions of this Agreement as if he, she or it were
a Management Shareholder hereunder and shall enter into a joinder to this
Agreement (in the form attached hereto as Exhibit A) to such extent and (ii)
Coyote shall receive such assurances as they may reasonably require to the
effect that such transfer does not violate the Act or applicable state
securities laws (including, without limitation, representations and warranties
as to investment intention and an opinion of counsel).
2. Notice by Shareholder of Proposed Transfers. If at any time a
-------------------------------------------
Management Shareholder proposes to transfer any Management Shares, such
Management Shareholder shall, prior to making any transfer of Management Shares,
give written notice (the "Notice") to the Company, Coyote and each other
Management Shareholder, specifying (i) the Management Shares to be so
transferred, (ii) the method of transfer, (iii) the identity of the prospective
transferee and (iv) in the case of a proposed bona fide sale pursuant to
Paragraph 1(a)(i) above, the terms of the written offer made by the prospective
purchaser, and containing a true and correct copy of such bona fide offer.
3. Offer to Sell Shares. In the case of a proposed bona fide sale
--------------------
pursuant to Paragraph 1(a)(i) above, the Notice provided in Paragraph 2 shall
constitute an irrevocable offer by the Management Shareholder who delivers the
Notice to sell such Management Shares to the Company, Coyote and the other
Management Shareholders on the terms and at the price specified in this
Paragraph 3 (such offer is hereinafter referred to as the "Offer to Sell," a
Management Shareholder making an Offer to Sell is hereinafter referred to as the
"Offeror-Shareholder", Coyote and the other Management Shareholders to whom the
Offer to Sell is being made are hereinafter referred to as the "Offerees", and
the Management Shares offered in the Offer to Sell are hereinafter referred to
as the "Offered Shares"). The Offer to Sell shall be at a price and on other
terms (including any deferral of payment in whole or in part) no less favorable
to the Company and the Offerees than the price and other terms offered by the
prospective purchaser specified in the Offeror-Shareholder's Notice, except that
------
if the proposed sale is to be
4
<PAGE>
wholly or partly for consideration other than money (the term "money" being used
in this Paragraph 3 to include deferred obligations to pay money), the Offer to
Sell shall be at a price equal to the amount of the net monetary consideration
plus the fair market value (as determined in good faith by the Board of
Directors within ten (10) days after receipt of the Notice by the Company), at
the date of the Offeror-Shareholder's Notice, of any consideration other than
money offered by the prospective purchaser.
4. Elections to Purchase Shares.
----------------------------
(a) The Company shall have the first right and option, for a period of
thirty (30) days after delivery of the Offer to Sell by the Offeror-Shareholder,
to accept all or any portion of the Offered Shares at the purchase price and on
the terms stated in the Offer to Sell by delivery to the Offeror-Shareholder,
with a copy to each Offeree, of written notice of its irrevocable election to
purchase (the "Company Election Notice"), specifying the number of Shares the
Company elects to purchase. If the Company does not elect to purchase all of
the Offered Shares, then each Offeree shall have the right and option, for a
period of thirty (30) days after the earlier of the expiration of the 30-day
period provided above and receipt of the Company Election Notice (the "Exercise
Period"), within which to elect to purchase all or any portion of the Offered
Shares which were not elected to be purchased by the Company.
(b) If the Offerees elect to accept the Offer to Sell with respect to
the Offered Shares which were not elected to be purchased by the Company, the
Offerees shall provide the Offeror-Shareholder with written notice (the "Offeree
Election Notice"), no later than the last day of the Exercise Period, specifying
the maximum number of such Offered Shares that each of the Offerees elects to
purchase. Each such election to purchase Offered Shares shall be irrevocable,
regardless of whether the number of Offered Shares deliverable upon the exercise
of such election shall be reduced in accordance with the provisions of Paragraph
4(c) below (in which case such election shall be deemed to constitute an
election to purchase such lesser number of Offered Shares as shall be determined
in accordance with such Paragraph 4(c)). Except as provided in Paragraph 5
below, all elections to purchase Offered Shares in accordance with Paragraph
4(a) and this Paragraph 4(b) shall be binding on the Offeror-Shareholder.
(c) If the aggregate number of Offered Shares accepted by the Offerees
exceeds the number of Offered Shares available to the Offerees, then the right
to purchase such Offered Shares shall be allocated to the electing Offerees as
follows: (i) first by allocating to each Offeree the lesser of (A) its pro rata
--- ----
portion of such Offered Shares on the basis of the respective amounts of Shares
owned by each electing Offeree on the date of the initial Offer to Sell, and (B)
the maximum number of Offered Shares elected to be purchased by such Offeree, as
indicated in the Offeree Election Notice, and (ii) thereafter, by repeatedly
allocating any remaining Offered Shares among those Offerees that have not yet
been allocated the maximum number of Offered Shares indicated in the Offeree
Election Notice, pro rata on the basis of the respective amounts of Shares owned
--- ----
by such Offerees on the date of the initial Offer to Sell, until all Offered
Shares have been allocated.
5. Procedures Upon Elections for Less than All of Shares Offered.
-------------------------------------------------------------
Notwithstanding the provisions of Paragraph 4, in the case of a proposed bona
fide sale by the Offeror-Shareholder pursuant to Paragraph 1(a)(i), elections to
purchase made by the Company
5
<PAGE>
and/or the Offerees shall not be binding on the Offeror-Shareholder if the
Company and the Offerees do not in the aggregate elect to purchase all of the
Offered Shares. In such event, no sales pursuant to such elections need be made
by the Offeror-Shareholder and the Offeror-Shareholder may then sell the Offered
Shares to the proposed bona fide purchaser, subject to the provisions of
Paragraph 7. Notwithstanding the foregoing, the Offeror-Shareholder may, by
written notice of acceptance to the Company and the electing Offerees within ten
(10) days after the earlier of his receipt of an Offeree Election Notice or
expiration of the Exercise Period, waive the requirement that all Offered Shares
be accepted by the Company and the Offerees and elect to sell to the Company
and/or the electing Offerees that part of the Offered Shares for which elections
have been made.
6. Closing of Purchase of Shares. If elections have been made by the
-----------------------------
Company and/or the electing Offerees in the aggregate for all of the Offered
Shares (or if the Company and/or the electing Offerees shall have received from
the Offeror-Shareholder a notice of waiver and acceptance pursuant to Paragraph
5), the Company, the electing Offerees and the Offeror-Shareholder shall
mutually agree on a place, time and date (not more than thirty (30) days nor
less than twenty (20) days after the expiration of the Exercise Period) for a
closing of such purchase and sale. At the closing, the Offeror-Shareholder
shall (i) deliver against receipt of the purchase price therefor by cash or
certified or bank cashier's check or wire transfer of funds, the certificate or
certificates representing the Management Shares each of the Company and the
electing Offerees has elected to purchase, properly endorsed for transfer, with
all necessary transfer and documentary stamps affixed, and in a form such that
upon presentation to the Company the Management Shares represented thereby may
be registered in the names of the respective purchasers and (ii) be deemed to
have represented and warranted to such purchaser that (a) the Management Shares
to be sold are beneficially and of record owned by such Offeror-Shareholder free
and clear of all liens, claims, privileges, options, security interests, rights
of first refusal, agreements, limitations or voting rights, preemptive rights,
charges or other encumbrances of any nature (except as expressly provided by
this Agreement) (an "Encumbrance") and (b) the sale and delivery of the
Management Shares by such Offeror-Shareholder as contemplated hereby shall vest
in the purchaser on such date good, valid and marketable title to such
Management Shares free and clear of all Encumbrances (clauses (a) and (b), the
"Sale Representations").
7. Disposition by Management Shareholder of Shares not Purchased by the
--------------------------------------------------------------------
Company and/or the Offerees. Any Management Shares not purchased by the Company
- ---------------------------
and the Offerees pursuant to Paragraphs 4 through 6 may be disposed of by the
Offeror-Shareholder to the prospective transferee named in his Notice under
Paragraph 2, at a price and on terms not more favorable to the transferee than
those specified in such Notice, but only within forty-five (45) days after the
expiration of the Exercise Period; provided, that a transferee shall, prior to
--------
the transfer, execute and deliver to the Company and each Shareholder a written
joinder to this Agreement and such other assurances as provided in Paragraph
1(c) hereof. Notwithstanding the foregoing, no such transferee shall be
entitled to be an "Offeree" for purposes of Paragraphs 2 through 6 or be
entitled to the rights set forth in Paragraphs 11 and 15 under this Agreement,
unless such transferee was a Management Shareholder prior to such transfer.
6
<PAGE>
8. Participation Rights.
--------------------
(a) No Shareholder or group of Shareholders (a "Transferring
Holder") shall transfer, directly or indirectly, other than in a public offering
under Paragraph 11 below, Shares which result in a 25% Transfer (as defined
below), unless the terms and conditions of such sale shall include an offer to
the other Shareholders (the "Other Shareholders") to include in the transfer, at
the option of each Other Shareholder, a portion (as determined in accordance
with Paragraph 8(c) below) of the Common Shares of each Other Shareholder at the
same price and on the same terms and conditions applicable to the Shares being
transferred by the Transferring Holder. For purposes of this Paragraph 8, the
term "25% Transfer" shall mean (i) with respect to any Management Shareholder or
group of Management Shareholders any transfer of Shares which, when added to all
previous transfers of Shares by Management Shareholders, would result in
Management Shareholders having transferred an amount of Shares which exceeds 25%
of the Shares owned collectively by the Management Shareholders immediately
after the Effective Time, and (ii) with respect to Coyote, any transfer of
Shares which, when added to all previous transfers of Shares by Coyote, would
result in Coyote having transferred an amount of Shares which exceeds 25% of the
Shares owned by Coyote immediately after the Effective Time.
(b) In the event that the Transferring Holder receives a bona fide
offer or offers from a third party to purchase, or otherwise determine to
transfer, Shares which purchase or transfer would trigger a 25% Transfer (the
"Participation Offer"), the Transferring Holder shall then cause the
Participation Offer to be reduced to writing and shall give each Other
Shareholder written notice thereof (a "Participation Notice"). Each
Participation Notice shall contain a true and correct copy of the Participation
Offer and shall identify the number of Shares with respect to which the
Transferring Holder has a bona fide offer or other agreement to sell (the
"Designated Shares"), the total number of Shares which the Transferring Holder
owns beneficially, the price per Share at which the sale is proposed to be made
and any other material term or condition of the Participation Offer. The Other
Shareholders shall have the right and option, within fifteen (15) days after the
Participation Notice is given to the Other Shareholders (the "Participation
Period") to accept the Participation Offer for the number of Common Shares as
determined pursuant to Paragraph 8(c) below. Each Other Shareholder who desires
to exercise such option shall provide the Transferring Holder with written
notice, specifying the maximum amount of Common Shares he or it wishes to
include in the Participation Offer (a "Participation Acceptance Notice"), which
shall constitute an irrevocable acceptance of the Participation Offer by such
Other Shareholder (each such Other Shareholder, a "Participating Shareholder").
(c) Unless the proposed transferee agrees to accept and purchase the
additional number of Common Shares specified in all Participation Acceptance
Notices, at the same price and on the same terms and conditions as set forth in
the Participation Notice, each Participating Shareholder shall have the right to
sell pursuant to the Participation Offer the number of Common Shares (the
"Participating Shares") allocated as follows: (i) first, by allocating to each
Participating Shareholder the lesser of (A) the maximum number of Common Shares
specified in such Participating Shareholder's Participation Acceptance Notice
and (B) a pro rata portion of the number of Designated Shares on the basis of
--- ----
the respective amounts of Shares then owned by the Transferring Holder and each
Participating Shareholder and (ii) thereafter, by repeatedly allocating any
remaining Participating Shares among those Participating
7
<PAGE>
Shareholders that have not yet been allocated the maximum number of
Participating Shares indicated in the Participation Acceptance Notice, pro rata
--- ----
on the basis of the respective amounts of Shares owned by such Participating
Shareholder on the date of the initial Participation Notice, until all
Participating Shares have been allocated.
(d) The Transferring Holder shall notify the Participating
Shareholders who have elected to sell their Common Shares at least five (5)
business days prior to the date upon which the transfer of Shares pursuant to
this Paragraph 8 shall be consummated, which notice shall contain the date, time
and location of the closing, and the final number of Participating Shares to be
sold by each such Participating Shareholder. The Participating Shareholders
shall deliver at the closing to the Transferring Holder the certificate or
certificates representing the number of Participating Shares calculated pursuant
to Paragraph 8(c) above, together with a power-of-attorney authorizing the
Transferring Holder to sell such Participating Shares pursuant to the terms of
the Participation Offer. At the closing of the transfer of the Designated Shares
to the third party pursuant to the Participation Offer, the Transferring Holder
shall remit to each of the Participating Shareholders the total sales price of
the Participating Shares of such Participating Shareholder sold or otherwise
disposed of pursuant thereto.
(e) If at the termination of the Participation Period any Other
Shareholder shall not have accepted the offer contained in the Participation
Notice, such Other Shareholder will be deemed to have waived any and all of his
rights under this Paragraph 8 with respect to the transfer of his Common Shares
to such third party. The Transferring Holder shall have 180 days in which to
sell Designated Shares, including the Participating Shares, to the third party,
at a price not less than that contained in the Participation Notice and on other
terms and conditions not less favorable than those set forth in the
Participation Notice.
(f) Notwithstanding any other provision contained in this Paragraph 8,
there shall not be any liability on the part of the Transferring Holder in the
event that the transfer of Designated Shares, including the Participating
Shares, pursuant to this Paragraph 8 is not consummated for any reason
whatsoever. The decision whether to effect a transfer of Designated Shares,
including the Participating Shares, pursuant to this Paragraph 8 shall be in the
sole and absolute discretion of the Transferring Holder.
9. Bring Along Rights. In the event that Coyote shall transfer or
------------------
propose to transfer, directly or indirectly, Shares which, when added to all
previous transfers of Shares by Coyote, would result in a transfer to any person
other than Coyote, the Company or their respective affiliates of greater than
twenty-five percent (25%) of the number of Shares outstanding on the date of
transfer (a "Transfer of Control"), then Coyote may require, by written notice
to each Management Shareholder (the "Bring-Along Notice") that each Management
Shareholder transfer an equivalent portion (on the basis of the amount of Shares
to be transferred by the Requisite Holders pursuant to the Transfer of Control
and the total number of Coyote Shares owned by Coyote at such time) of his
Management Shares in the Transfer of Control on the same terms and conditions
contained in the Bring-Along Notice. The Bring-Along Notice shall contain a
true and correct copy of the terms of the Transfer of Control and shall identify
the third party, the number of Coyote Shares with respect to which Coyote have a
bona fide offer, the price per Coyote Share at which the sale is proposed to be
made and all other material terms and conditions of the Transfer of Control,
including the date, time and location of the closing.
8
<PAGE>
The Bring-Along Notice shall be delivered not less than five (5) business days
prior to the closing of the purchase and sale contemplated by this Paragraph 9.
In such event, each of the Management Shareholders shall deliver at the closing
to Coyote the certificate or certificates representing his Management Shares
together with a power-of-attorney authorizing Coyote to sell such Management
Shareholder's equivalent portion of the Management Shares pursuant to the terms
of the Bring-Along Notice. No Management Shareholder shall be obligated to pay
more than his pro rata share (based upon the amount of consideration received
--- ----
for or with respect to their Shares) of reasonable fees and expenses incurred in
connection with such Transfer of Control (as evidenced by reasonable supporting
documentation) to the extent such costs are incurred for the benefit of the
selling Shareholders generally, including, without limitation, fees and expenses
of one law firm, one accounting firm and one financial advisor acting on behalf
of the Company and/or the Shareholders generally, and are not otherwise paid by
the Company or the acquiring party. Costs incurred by or on behalf of a
Shareholder for his or its sole benefit will not be considered costs of the
transaction hereunder. At the closing of the Transfer of Control, Coyote shall
remit to each of the Management Shareholders the total sales price (net of such
Management Shareholder's pro rata portion of reasonable related expenses as
--- ----
specified above) of the Management Shares of such Management Shareholder sold or
otherwise disposed of pursuant thereto. The Management Shareholders hereby
agree to take all reasonable actions necessary to consummate the Transfer of
Control, including, but not limited to, the execution of necessary or
appropriate agreements, the taking of any necessary corporate action and the
waiving of any dissenters, appraisal or similar rights.
10. Representations and Warranties.
------------------------------
(a) Each Management Shareholder hereby, severally, and not jointly
represents and warrants to the Company and Coyote that, as of the time such
Management Shareholder becomes a party to this Agreement, (i) such Management
Shareholder has the power, capacity and authority to enter into this Agreement
and to perform fully such Management Shareholder's obligations hereunder and
(ii) this Agreement has been duly executed and delivered by such Management
Shareholder and constitutes a legal, valid and binding obligation of such
Management Shareholder, enforceable against such Management Shareholder in
accordance with its terms.
(b) The Company represents and warrants to each Management Shareholder
that (i) the Company is duly organized, validly existing and in good standing
under the laws of Delaware, and has all requisite corporate power to carry on
its business as it is now being conducted, (ii) the execution, delivery and
performance of this Agreement by the Company have been duly authorized by the
Board of Directors, and (iii) this Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
(c) Coyote hereby represents and warrants to the Company and each
Management Shareholder that (i) each of Coyote I and Coyote II is duly
organized, validly existing and in good standing under the laws of Delaware, and
has all requisite limited liability company power to carry on its business as it
is now being conducted, (ii) each of Coyote I and Coyote II has the authority to
enter into this Agreement and to fully perform its obligations hereunder, and
(iii) this Agreement has been duly executed and delivered by each of Coyote I
9
<PAGE>
and Coyote II and constitutes the legal, valid and binding obligation of each of
Coyote I and Coyote II, enforceable against each of Coyote I and Coyote II in
accordance with its terms.
11. Incidental Registration.
-----------------------
(a) If the Company at any time (other than pursuant to an initial
public offering of the Company's securities) proposes to register any Common
Shares under the Act for sale to the public, (i) for its own account (except
with respect to registration statements on Forms S-4, S-8 or such other form
which is not available for registering Common Shares for sale to the public) or
(ii) for the account of Coyote, each such time it will give prior written notice
to all Management Shareholders of its intention so to do. Upon the written
request of any such Management Shareholder, received by the Company within
twenty (20) days after the giving of any such notice by the Company, to register
any of his Common Shares (which request shall state the intended method of
disposition thereof), the Company will use all commercially reasonable efforts
to cause the Common Shares as to which registration shall have been so requested
to be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit the
sale by the Management Shareholder (in accordance with its written request) of
such Common Shares so registered. Alternatively, the Company may in its sole
discretion include such Common Shares in a separate registration statement to be
filed concurrently with the registration statement for the securities to be
filed by the Company for its own account or for the account of Coyote. In the
event that any registration of Common Shares for the account of the Company
pursuant to this Paragraph 11 shall be, in whole or in part, an underwritten
public offering of Common Shares, the number of Common Shares owned by
Management Shareholders and Coyote to be included in such an underwriting may be
reduced (pro rata among APL, the requesting Management Shareholders, Coyote and
other persons with pari passu incidential registration rights, as may be
applicable, based upon the number of Shares owned by APL, such Management
Shareholders, Coyote and such other persons) due to underwriter market
limitations if, and to the extent, that the managing underwriter advises the
Company that in its opinion such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein. In addition, if the
managing underwriter so advises, for any reason, against the inclusion of all or
any portion of Common Shares owned by Management Shareholders in the public
offering, then the Management Shareholders shall only have the right to register
Common Shares therein as so advised by the managing underwriter. It is
acknowledged by the parties hereto that the rights of any selling Management
Shareholder to include Common Shares in a registration shall be subordinate to
those of the Company and, except as expressly provided herein, on a parity with
Coyote or other person selling Common Shares for its own account so that, except
as expressly provided herein, cut backs shall be made on a pro rata basis based
on the number of Common Shares held by each such person. Except as set forth
above, there shall be no limit to the number of registrations that may be
requested pursuant to this Paragraph 11.
(b) In connection with each registration pursuant to Paragraph 11(a)
covering an underwritten public offering, each Management Shareholder selling
Common Shares pursuant thereto agrees to (i) enter into a written agreement with
the managing underwriter under the same terms and conditions as apply to the
Company or the selling shareholders, as applicable, and (ii) furnish to the
Company in writing such information with respect to themselves and the proposed
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distribution by them as reasonably shall be necessary and shall be requested by
the Company in order to comply with federal and applicable state securities
laws.
(c) If, at any time after giving notice of its intention to register any
stock pursuant to this Paragraph 11 and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such stock, the Company shall
give written notice to all Management Shareholders and, thereupon, shall be
relieved of its obligation to register any Management Shares in connection with
such registration.
(d) The Management Shares shall cease to be registrable pursuant to this
Paragraph 11 on the date upon which they are effectively registered under the
Act and disposed of in accordance with any registration statement covering it.
12. Expenses. All expenses incurred by the Company in complying with
--------
Paragraph 11, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for the sellers of Management Shares, but excluding
any Selling Expenses, are herein referred to as "Registration Expenses."
"Selling Expenses" as used herein mean all underwriting discounts and selling
commissions applicable to the sale of Management Shares.
The Company will pay all Registration Expenses in connection with each
registration statement under Paragraph 11. All Selling Expenses in connection
with each registration statement under Paragraph 11 shall be borne by the
participating sellers of Management Shares in proportion to the number of
shares sold by each, or by such participating sellers of Management Shares other
than the Company (except to the extent the Company shall be a seller of
Management Shares) as they may agree.
13. Holdback Agreements. Notwithstanding any other provision hereof,
-------------------
except as otherwise may be agreed in writing by the parties hereto concurrently
or subsequent to this Agreement, with respect to each and every public offering,
each Shareholder agrees not to offer, sell or otherwise transfer any Shares
(except for Shares sold (a) in such public offering or (b) to a Permitted
Transferee) during the black-out period prior to the effective date of the
applicable registration statement or other offering document as advised by
counsel for the Company and during the period after such effective date not to
exceed six (6) months.
14. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any Management Shareholder's
Common Shares under the Act pursuant to Paragraph 11, the Company will indemnify
and hold harmless, to the full extent permitted by law, each Management
Shareholder selling Common Shares thereunder, each underwriter of such Common
Shares thereunder and each other person, if any, who controls such selling
Management Shareholder or underwriter within the meaning of the Act
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<PAGE>
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against
any losses, claims, damages, liabilities and expenses, joint or several, to
which such selling Management Shareholder, underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Management
Shareholder's Common Shares were registered under the Act pursuant to Paragraph
11, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will pay
or reimburse each such selling Management Shareholder, each such underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company (i) will not be
-------- -------
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information pertaining to such selling Management Shareholder and furnished by
any such selling Management Shareholder, any such underwriter or any such
controlling person, as the case may be, in writing specifically for use in such
registration statement, prospectus, amendment or supplement and (ii) will not be
liable for amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company,
such consent not to be unreasonably withheld or delayed.
(b) In the event of a registration of any Common Shares under the Act
pursuant to Paragraph 11, each Management Shareholder selling Common Shares
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the Act or
otherwise, but only insofar as such losses, claims, damages or liabilities (or
actions in respect thereof), arise out of or are based upon an untrue statement
or alleged untrue statement or omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, made in reliance upon and in conformity with information
pertaining to such selling Management Shareholder, as such, furnished in writing
to the Company by such selling Management Shareholder specifically for use in
such registration statement under which such Management Shareholder's Common
Shares were registered under the Act pursuant to Paragraph 11, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, and will pay or reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that (i) the liability of
-------- -------
each selling Management Shareholder hereunder shall be limited to the proportion
of any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of the Common Shares sold by such
selling Management Shareholder under such registration statement bears to the
total public offering price of all securities sold thereunder, but not in any
event to exceed the
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<PAGE>
net proceeds received by such selling Management Shareholder from the sale of
Common Shares covered by such registration statements and (ii) no selling
Management Shareholder shall be liable for amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of such selling Management Shareholder, such consent not to
be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of any claim or the commencement of any action or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Paragraph 14 and shall only relieve it from any liability which it may have to
such indemnified party under this Paragraph 14 if and to the extent the
indemnifying party is materially prejudiced by such omission. In case any such
action shall be brought against any indemnified party and the indemnified party
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Paragraph 14 for any legal or other professional expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
-------- -------
include both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable fees and expenses of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred. No indemnifying party, in the defense of any
such claim or litigation against an indemnified party, shall consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation, unless such indemnified party shall otherwise consent in writing.
An indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim shall not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim.
(d) In order to provide for just and equitable contribution in any case
in which either (i) any Management Shareholder exercising registration rights
under Paragraph 10 of this Agreement, or any controlling person of any such
Management Shareholder, makes a claim for indemnification pursuant to this
Paragraph 14 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and following the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
this Paragraph 14 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any such Management
Shareholder or any such controlling person in circumstances for which
13
<PAGE>
indemnification is provided this Paragraph 14; then, and in each such case, the
Company and such Management Shareholder shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect both
the relative benefit received by such Management Shareholder and the relative
fault of the Company and such Management Shareholder; provided, however, that,
-------- -------
in any such case, (A) no such Management Shareholder will be required to
contribute any amount in excess of the public offering price of all such
Management Shareholder's Common Shares offered by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation. For purposes of the preceding sentence, the
relative benefit received by such Management Shareholder shall be deemed to be
in the same proportion as the public offering price of his Common Shares offered
by the registration statement bears to the public offering price of all
securities offered by such registration statement; and the relative fault of the
Company and such Shareholder shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission of a material fact relates to information supplied by the Company or by
such Management Shareholder and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
15. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Securities and Exchange Commission (the
"Commission") which may at any time permit the sale of the Common Shares to the
public without registration, at all times after any registration statement
covering a public offering of securities of the Company under the Act shall have
become effective, the Company agrees to use all reasonable efforts to: (a) make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Act; (b) use all reasonable efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and the Exchange Act; and (c) furnish to each Management
Shareholder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of such Rule 144 and of the Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
Shareholder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Management Shareholder to sell any Common Shares
without registration.
16. Preemptive Rights.
-----------------
(a) In the event that the Company proposes to issue (a "Proposed
Issuance") any Common Shares or any securities containing options or rights to
acquire any Common Shares or any securities convertible into or exchangeable for
Common Shares ("New Securities") prior to an initial public offering of the
Company's securities and other than pursuant to the exceptions specified below,
the Company shall deliver a notice, with respect to such Proposed Issuance (the
"Preemptive Notice"), to each Management Shareholder and Coyote setting forth
the identity of the proposed purchaser (the "Proposed Purchaser"), the period of
time within which the Preemptive Right must be exercised (the "Acceptance
Period") and the price, terms and conditions of the Proposed Issuance. Subject
to subsection (c) below, each Management Shareholder and Coyote shall have the
right (the "Preemptive Right"), exercisable as hereinafter
14
<PAGE>
provided, to participate in such issuance of New Securities ("Offered
Securities") by purchasing up to an amount of such New Securities proposed to be
issued to the Proposed Purchaser equal to (i) the lesser of (A) the maximum
number of New Securities specified in such Shareholder's Purchase Notice (as
defined below) and (B) the aggregate amount of such New Securities multiplied by
a fraction, the numerator of which shall be the aggregate number of Common
Shares owned by such Management Shareholder or Coyote on the date of such notice
and the denominator of which shall be the total number of Common Shares
outstanding on such date (the "Proportionate Share") and (ii) thereafter, by
repeatedly allocating any remaining Offered Securities among those Shareholders
that have not yet been allocated the maximum number of Offered Securities
indicated in the Purchase Notice, pro rata on the basis of the respective
--- ----
amounts of Shares owned by such Shareholder on the date of the initial Purchase
Notice, until all Offered Securities have been allocated, such purchase to be at
the same price and on the same terms and conditions as the Proposed Issuance.
Notwithstanding the foregoing, a Management Shareholder shall only be entitled
to exercise the Preemptive Right if at the time of exercise of the Preemptive
Right such Management Shareholder is an employee of the Company pursuant to a
binding written employment agreement unless such Management Shareholder was
terminated by the Company from such position without Cause (as defined in such
employment agreement).
(b) Anything to the contrary notwithstanding, the Preemptive Rights
provided for herein shall not be applicable to:
(i) options granted to and New Securities issued upon exercise of
options granted to, officers, employees or directors of, or consultants to,
the Company and/or any of its subsidiaries;
(ii) warrants issued to lenders providing debt financing to the Company
and/or any of its subsidiaries and New Securities issued upon the exercise,
conversion or exchange of such warrants in accordance with their stated
terms;
(iii) any New Securities issued by the Company in connection with an
acquisition by the Company and/or any of its subsidiaries;
(iv) any New Securities issued by the Company in an underwritten public
offering;
(v) New Securities issued upon the exercise or conversion of any Shares
of the Company that are convertible, exchangeable or exercisable for Shares
and all stock appreciation rights, phantom stock rights and other rights to
acquire, or to receive or be paid an amount based on the market price (less
any exercise, conversion or purchase price) of, the Shares, issued in
compliance with (or not otherwise in violation of) this Section 16;
(vi) New Securities issued in a stock recapitalization pro rata to all
holders of Shares;
(vii) New Securities issued upon conversion of other Shares of the
Company pursuant to the Certificate of Incorporation of the Company as in
effect on the date hereof, as the same may be amended, modified,
supplemented or restated; and
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<PAGE>
(viii) New Securities issued to Persons (who are not Affiliates (as
defined below) of the Company) entering into "corporate partnering,"
"strategic investment" or other similar types of transactions or
relationships with the Company (the characterization of such transactions
or relationships to be in the sole discretion of the Board of Directors),
in which the granting of equity or equity rights constitutes an aspect of
such transaction or relationship.
(c) The Preemptive Rights shall be exercisable by delivery of
notice (the "Purchaser Notice") to the Company given within the Acceptance
Period set forth in the Preemptive Notice. If a Shareholder shall fail to
respond to the Company within the Acceptance Period, such failure shall be
regarded as a rejection of such Shareholder's right to exercise his Preemptive
Right. The closing of any purchase by the Shareholders under this Paragraph 16
shall be held at such time and place upon which the parties to the transaction
may agree. At such closing, the Shareholders participating in the purchase shall
deliver by certified bank check or wire transfer, payment in full for such New
Securities and all parties to the transaction shall execute such additional
documents as are otherwise deemed necessary or appropriate by the Company. At
such closing, the Company may issue and sell to the Proposed Purchaser such
portion of the Offered Securities as have not been purchased by the Shareholders
pursuant to the exercise of their Preemptive Rights only at the same price and
on the same terms and conditions as the Offered Securities sold to Shareholders.
(d) In the event of a Proposed Issuance of New Securities, which
Proposed Issuance is subject to the Preemptive Rights under this Paragraph 16
and which is offered only in combination with the purchase of debt or debt
securities, then the Preemptive Rights shall apply to the combination and a
Shareholder exercising his Preemptive Right shall be entitled and required to
purchase his pro rata share of both the debt and equity components of such
--- ----
combination on the basis set forth in Paragraph 16(a).
(e) For purposes of this Agreement the following terms shall be
defined as follows:
"Affiliate" means, as to any person, any other person that directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with, such person.
"Person" shall be construed as broadly as possible and shall include
an individual or natural person, a partnership (including a limited liability
partnership), a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental authority.
(f) Preemptive Rights pursuant to this Paragraph 16 shall terminate
upon an initial public offering of the Company's securities.
17. Certain Agreements.
------------------
(a) Each party agrees that Donald C. Orris will be appointed the
chief executive officer of the Company shall hold such office for as long as he
is employed by the Company.
16
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(b) The Company agrees that, unless on an arms-length basis, no
affiliated transaction between the Company and Apollo Management, L.P.
("Apollo") or any affiliate of Apollo which is material to the Company or which,
combined with all other affiliated transactions between the Company and Apollo
or any affiliate of Apollo would be material to the Company, will be undertaken
without the consent of the chief executive officer of the Company.
Notwithstanding the foregoing, the parties agree that following shall be
specifically excluded from the foregoing limitation on Affiliate transactions:
(i) all amounts payable to Apollo pursuant to the terms and provisions of that
certain Management Agreement of even date herewith between the Company and
Apollo (the "Management Agreement") (as it may be extended); provided, that (x)
--------
the fees set forth in such Management Agreement may not be increased unless
approved in accordance with the first sentence of this Paragraph 15(b) and (y)
the $500,000 management fee shall not be deducted for purposes of calculating
net income of the Company for purposes of computing awards under any bonus or
stock option plans of the Company, (ii) customary board fees payable to members
of the Board of Directors designated by Coyote; (iii) any expense
reimbursements; (iv) the Registration Rights Agreement between the Company and
Coyote, dated as of even date herewith; (v) indemnification rights in favor of
Coyote or its Affiliates; and (vi) securities issued to Coyote as to which
preemptive rights pursuant to Section 16 hereof are available.
(c) The parties agree that with respect to the right of each of the
Management Shareholders to be an "Offeree" for purposes of Paragraphs 2 through
6, as well as the rights set forth in Paragraphs 11 and 16, any notice required
to be provided pursuant to such Paragraphs by any party hereto to any
Management Shareholder who is no longer an employee of Pacer, will be sufficient
as to any such Management Shareholder if such notice is delivered to Pacer
International, Inc., 3746 Mt. Diablo Blvd., Suite 110, Lafayette, CA 94549,
Attention: Donald C. Orris.
(d) Each Management Shareholder acknowledges the APL Shareholders'
Agreement and the Investors Shareholders' Agreement and agrees with the terms
thereof, the rights given to, and obligations imposed upon, the parties thereto.
(e) The Corporation hereby covenants and agrees with Gerry Angeli
("Angeli") and Gary I. Goldfein ("Goldfein") that, until the consummation of the
Company's initial public offering of Common Shares for as long as such persons
continue to be Shareholders of the Company, Angeli and Goldfein (each, an
"Observer") shall have the right to be present at all meetings of the Board of
Directors and all committees thereof. The Corporation will give each Observer
reasonable prior notice (it being agreed that the same prior notice given to the
Board of Directors shall be deemed to be reasonable) in any manner permitted in
the Company's bylaws for notices to directors of the time and place of any
proposed meeting of the Board of Directors, such notice in all cases to include
true and complete copies of all documents furnished to any director in
connection with such meeting or, if a meeting is held by telephone conference,
to participate therein for the purpose of listening thereto.
18. Confidentiality; Noncompetition.
-------------------------------
(a) During the term of this Agreement and at all times thereafter, each
Management Shareholder agrees that, except to the extent required in the course
of his
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<PAGE>
employment, he will not divulge to anyone (other than the Company, its
subsidiary or any persons employed or designated by the Company or its
subsidiary) any confidential knowledge or information relating to the business
of the Company or any of its subsidiaries or affiliates, including, without
limitation, all types of trade secrets (unless readily ascertainable from public
or published information or trade sources), product design and customer and
supplier information. Each Management Shareholder further agrees not to
disclose, publish or make use of any such knowledge or information for personal
purposes or for the benefit of any person, firm, corporation or other entity
(other than the Company, its subsidiary or any persons employed or designated by
the Company or its subsidiary) without the prior written consent of the
Company or its subsidiary.
(b) No Management Shareholder, nor any Affiliate thereof, will for the
period set forth opposite such Management Shareholders name on Annex I hereto
-------
following the Effective Time (the "Noncompetition Period"), (i) in any
---------------------
geographic area where the Company or its subsidiary conducts business during the
Noncompetition Period, engage or participate in directly or indirectly (whether
as an officer, director, employee, partner, consultant, holder of an equity or
debt investment, lender or in any other manner or capacity, including, without
limitation, by the rendering of services or advice to any person), or lend his
name (or any part or variant thereof) to, any Competing Business (as defined
below); (ii) deal, directly or indirectly, in a competitive manner with any
customers doing business with the Company or its subsidiary during the
Noncompetition Period; (iii) solicit or employ any officer, director or agent of
the Company or its subsidiary to become an officer, director, or agent of any
Management Shareholder, their respective Affiliates or anyone else; or (iv)
engage in or participate in, directly or indirectly, any business conducted
under any name that shall be the same as or similar to the name of the Company
or its subsidiary or any trade name used by the Company or its subsidiary.
Ownership by a Management Shareholder for investment of less than 2% of the
outstanding shares of capital stock or class of debt securities of any
corporation with one or more classes of its capital stock listed on a national
securities exchange or actively traded in the over-the-counter market shall not
constitute a breach of the foregoing covenant. The term "Competing Business"
shall mean any transportation or other business that the Company or its
subsidiary or any of their respective Affiliates have engaged in at any time
during the period of employment of the applicable Management Shareholder in any
city or county in any state of the United States, Canada or Mexico including,
without limitation, any business engaged in (i) intermodal marketing, (ii)
flatbed specialized hauling services, (iii) less-then-truckload common carrier
services, (iv) drayage, consolidation, deconsolidation or distribution services,
(v) contract warehousing, freight handling or logistic services, (vi)
comprehensive transportation management programs or services to third party
customers, (vii) freight consolidation and deconsolidation, (viii) traffic
management, and (ix) railroad signal project management.
19. Voting Proxy. Each Management Shareholder (other than Goldfein and
------------
Steiner, (each an "Interstate Holder")) hereby grants to the other Management
Shareholders (other than the Interstate Holders), acting jointly, effective only
upon, but at all times after (except as provided herein), any transfer of Shares
owned by such Management Shareholder upon on in connection with the death or
marital divorce, annulment or separation of such Management Shareholder (each
such event a "Proxy Event"), an irrevocable proxy to vote such Shares at any and
all meetings of the stockholders of the Company and to execute and deliver
18
<PAGE>
any and all written consents in lieu thereof and otherwise exercise any and all
consensual rights with respect to such Shares to the same extent and with the
same effect as such Management Shareholder could do under this Agreement, under
any applicable law or otherwise. Each Interstate Holder hereby grants to the
other (or in the case such interstate Holder is the only Interstate Holder
hereunder, to the other Management Shareholders), effective only upon but at all
times after (except as provided herein), any transfer of Shares owned by such
Interstate Holder upon or in connection with a Proxy Event of such Interstate
Holder, an irrevocable proxy to vote such Shares at any and all meetings of the
stockholders of the Company and to execute and deliver any and all written
consents in lieu thereof and otherwise exercise any and all consensual rights
with respect to such Shares to the same extent and with the same effect as such
Interstate Holder could do under this Agreement, under any applicable law or
otherwise. Each Management Shareholder (including the Interstate Holders)
acknowledges and agrees that the proxy granted by him under this Paragraph 19 is
coupled with an interest and may not be revoked. All Shares subject to a proxy
granted hereunder that becomes effective pursuant to the terms hereof and that
is to be voted by a proxy holder or holders pursuant to this Paragraph 19 shall
be voted by such proxy holder or holders in the manner provided in the bylaws of
the Company as in effect at the time in question.
20. Financial Statements. The Company will provide each Management
--------------------
Shareholder with copies of its quarterly (unaudited) and annual audited
financial statements promptly upon completion of such financial statements
during any period in which a Management Shareholder remains a holder of Shares,
but is not an officer or director of or consultant to the Company.
21. General Restriction. Each Management Shareholder and Coyote
-------------------
understands and agrees that (a) the Common Shares and Management Options
received pursuant to the Alternative Consideration Letter have not been
registered under the Securities Act and are restricted securities; (b) he or it
will not, directly or indirectly, sell, assign, transfer, grant a participation
in, pledge or otherwise dispose of any Common Shares or Management Options (or
solicit any offers to buy or otherwise acquire, or take a pledge of any Common
Shares or New Options) except in compliance with the Securities Act and the
terms and conditions of this Agreement; and (c) any attempt to transfer any
Common Shares or Management Options not in compliance with this Agreement shall
be null and void and the Company shall not, and shall cause any transfer agent
not to, give any effect in the Company's records to such attempted transfer.
22. Legends.
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(a) In addition to any other legend that may be required, each
certificate for Common Shares including Common Shares issued upon exercises of
New Options that is issued to any Management Shareholder shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER
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AS SET FORTH IN THE SHAREHOLDER'S AGREEMENT DATED AS OF May 28,
1999, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM PACER
INTERNATIONAL, INC. OR ANY SUCCESSOR THERETO."
(b) If any Common Shares shall become registered under the Securities
Act, the Company shall, upon the written request of the holder thereof, issue to
such holder a new certificate evidencing such shares without the first sentence
of the legend required by Paragraph 22(a) endorsed thereon. If any Common Shares
cease to be subject to any and all restrictions on transfer set forth in this
Agreement, the Company shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such Common Security without
the second sentence of the legend required by Paragraph 22(a) endorsed thereon.
23. Further Assurances. The parties hereto agree to execute and deliver
------------------
all such further instruments as may be necessary from time to time to carry out
the provisions of this Agreement.
24. Notices. All offers, acceptance, notices, certificates and other
-------
communications provided for in this Agreement shall be in writing and (except as
otherwise provided in this Agreement) shall be deemed to have been given when
(a) sent by facsimile transmission, (b) sent by a nationally known overnight
delivery service, (c) delivered by hand or (d) mailed by first-class registered
or certified mail in a post-paid envelope, in each case addressed to the
respective persons to be notified as follows: in the case of Coyote, c/o Apollo
Management, L.P., 1301 Avenue of the Americas, 38th Floor, New York, NY 10019;
Attention: Joshua J. Harris, with a copy to, Michael Weiner, Esq., Apollo
Management, L.P., 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067,
and with a copy to, Morton A. Pierce, Esq./Douglas L. Getter, Esq., Dewey
Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019; in the
case of the Management Shareholders, at their respective addresses appearing on
the signature pages of this Agreement or at such other address as the party to
be notified shall from time to time have furnished to the other parties in
writing.
25. Amendment; Termination. No provision of this Agreement may be
----------------------
waived except by an instrument in writing executed by the party against whom the
waiver is to be effective. This Agreement may be amended only by an instrument
executed by the parties hereto holding a majority of all of the Common Shares
held by the parties hereto on a fully diluted basis or by their successors and
assigns; provided, however, that in the event any amendment materially and
-------- -------
adversely affects the rights or obligations of any party to this Agreement
without similarly affecting the rights or obligations of any other party hereto,
this Agreement may not be amended without such party's approval. Except with
respect to Paragraphs 14, 18, 21, 22 and Paragraphs 24 through 27 this Agreement
shall terminate automatically upon the earlier of (i) the tenth anniversary of
the date hereof and (ii) at such time as the Company shall be a Public Company
(as defined below) and Coyote shall have sold in the aggregate pursuant to one
or more public offerings, fifty percent (50%) of the total number of Coyote
Shares owned by them at the Effective Time. For the purposes of the foregoing
provision, the term "Public Company" means a corporation with one or more
classes of equity securities listed on a national securities exchange or
publicly traded in the over-the-counter market.
20
<PAGE>
26. General.
-------
(a) This Agreement (i) shall be construed and enforced in accordance
with the laws of the State of New York, (ii) except as set forth in Paragraph
26(c) below, constitutes the entire agreement, and supersedes any and all prior
agreements and understandings between the parties in respect to the subject
matter hereof, (iii) shall bind and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, personal representatives,
successors and assigns and (iv) may be executed in two or more counterparts each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. The parties hereto hereby consent and agree that
they shall commence any action with respect to any claims or disputes between
the parties hereto pertaining to this Agreement or to any matter arising out of
or related to this Agreement in the United States District Court for the
Southern District of New York, so long as the action falls within the subject
matter jurisdiction of such court; in the event any such action shall be
determined by the court to be outside its subject matter jurisdiction, then the
parties agree to commence any such action in the Supreme Court of New York
County, New York and to take such action as may be necessary to effect
assignment of such action to the Commercial Part of that court. The parties
hereto expressly submit and consent in advance to such jurisdiction in any
action or suit commenced in any such court, and hereby waive any objection which
it may have based upon lack of personal jurisdiction, improper venue or forum
non conveniens and hereby consent to the granting for such legal or equitable
relief as is deemed appropriate by such court. Each party hereto irrevocably
consents to the service of process by registered or certified mail, postage
prepaid, to it at its address given in accordance herewith.
(b) The parties hereto acknowledge that irreparable damage would result if
this Agreement is not specifically enforced and that, therefore, the rights and
obligations of the parties under this Agreement may be enforced by a decree of
specific performance issued by a court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith without the necessity of posting any bond. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(c) The restrictions with respect to Management Shares set forth herein
shall be in addition to and shall in no way limit any other restrictions on the
Management Shares set forth in any other agreement.
(d) The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) To the extent that any provision of this Agreement shall be invalid
or unenforceable, it shall be considered deleted herefrom and the remainder of
such provision and of this Agreement shall be unaffected and shall continue in
full force and effect. In furtherance and not in limitation of the foregoing, if
any provision, term, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void,
21
<PAGE>
unenforceable or against its regulatory policy, then such provision, term,
covenant or restriction shall be construed to cover only that duration, extent
or activities which may be validly and enforceably covered and the remainder of
the provisions, terms covenants and restrictions contained herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
27. Complete Agreement. This Agreement and the Exhibit attached hereto
------------------
and which are hereby incorporated by reference herein, contains the entire
agreement among the parties, superseding all prior agreements whether oral or
written between parties with respect to the subject matter hereof. Without
limiting the foregoing, the parties acknowledge that the Amended and Restated
Stockholders Agreement, dated December 16, 1997 among PMT Holdings, Inc. and the
stockholders party thereto is no longer in effect with respect to any of the
parties hereto. No Management Shareholder shall enter into any Shareholder
agreements or arrangements of any kind with any person with respect to any
Shares on terms inconsistent with the provisions of this Agreement (whether or
not such agreements or arrangements are with other Management Shareholders or
with persons that are not parties to this Agreement), including agreements or
arrangements with respect to the acquisition or disposition of Shares in a
manner which is inconsistent with this Agreement.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and the year first above written.
PACER INTERNATIONAL, INC.
By: /s/ Donald C. Orris
________________________________
Donald C. Orris
President and Chief Executive Officer
COYOTE ACQUISITION LLC
By: /s/ Marc Becker
________________________________
Marc Becker
Vice President
COYOTE ACQUISITION II LLC
By: /s/ Marc Becker
________________________________
Marc Becker
Vice President
MANAGEMENT SHAREHOLDERS:
/s/ Donald C. Orris
___________________________________
Donald C. Orris
/s/ Gerry Angeli
___________________________________
Gerry Angeli
/s/ Robert L. Cross
___________________________________
Robert L. Cross
23
<PAGE>
/s/ Gary I. Goldfein
___________________________________
Gary I. Goldfein
/s/ Allen E. Steiner
___________________________________
Allen E. Steiner
/s/ John W. Hein
___________________________________
John W. Hein
/s/ Richard Hyland
___________________________________
Richard Hyland
24
<PAGE>
Exhibit A
---------
JOINDER IN
----------
SHAREHOLDERS' AGREEMENT
-----------------------
In consideration of the transfer to (him) (her) (it) of _____ shares
of common stock, no par value, of Pacer International, Inc. (the "Company") and
the registration of such transfers on the books of the Company, ____________ , a
__________ ("Additional Shareholder"), and the Company agree that, as of the
date written below, Additional Shareholder shall become a party as a Management
Shareholder to that certain Shareholders' Agreement, dated as of May 28, 1999,
among the Company, Coyote Acquisition LLC, Coyote Acquisition II LLC, and
certain individual shareholders named therein (the "Shareholders' Agreement"),
and shall be bound by all of the terms and provisions of the Shareholders'
Agreement, as though he was an original party thereto and was included in the
definition of "Management Shareholder" as used therein; provided, that an
Additional Shareholder shall not be entitled to be an "Offeree" for purposes of
Paragraphs 2 through 6 or be entitled to the rights set forth in Paragraphs 11
and 16 of the Shareholders Agreement.
Executed as of the _____ day of ________________, ____.
[ ]
By:_______________________________
Title:
_______________________________
Shareholder
25
<PAGE>
Exhibit 4.14
________________________________________________________________________________
SHAREHOLDERS' AGREEMENT
among
BT CAPITAL INVESTORS, L.P.,
PACER INTERNATIONAL EQUITY INVESTORS, LLC.,
COYOTE ACQUISITION LLC,
COYOTE ACQUISITION II LLC
AND
PACER INTERNATIONAL, INC.
Dated as of May 28, 1999
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I................................................................. 2
1.1. Restrictions on Transfer....................................... 2
------------------------
ARTICLE II................................................................ 2
ARTICLE III............................................................... 3
ARTICLE IV................................................................ 4
ARTICLE V................................................................. 6
5.1. Definitions.................................................... 9
-----------
5.2. Designated Actions and Irrevocable Proxy....................... 9
----------------------------------------
5.3. Termination.................................................... 10
-----------
ARTICLE VI................................................................ 12
6.1. Assignment..................................................... 12
----------
6.2. Entire Agreement............................................... 12
----------------
6.3. Notices........................................................ 12
-------
6.4. Waivers; Amendments............................................ 14
-------------------
6.5. Counterparts................................................... 14
------------
6.6. Expenses....................................................... 14
--------
6.7. Remedies....................................................... 14
--------
6.8. Applicable Law; Submission to Jurisdiction..................... 15
------------------------------------------
6.9. Severability................................................... 15
------------
6.10. Certain Definitions............................................ 15
-------------------
6.11. Termination.................................................... 16
-----------
</TABLE>
<PAGE>
SHAREHOLDERS' AGREEMENT
Agreement (this "Agreement") dated as of this 28th day of May, 1999,
among BT Capital Investors, L.P., a Delaware limited partnership ("BT "), Pacer
International Equity Investors, LLC., a Delaware limited liability company
("CSFB") (BT and CSFB, together, the "Assignee Purchasers"), Coyote Acquisition
LLC ("Coyote I"), Coyote Acquisition II LLC, ("Coyote II" and, Coyote I and
Coyote II, collectively, the "Coyote Entities") and Pacer International, Inc., a
Tennessee corporation (the "Company").
WHEREAS, Coyote I and APL Limited, a Delaware corporation, have
entered into a Stock Purchase Agreement, dated as of March 15, 1999 (the "Stock
Purchase Agreement"), whereby Coyote I will purchase common shares, no par
value, of the Company (the "Common Stock").
WHEREAS, pursuant to the Assignment Agreement, dated as of May 28,
1999, between Coyote II and Coyote I, Coyote I has assigned its right to
purchase 478,000 shares of Common Stock (on a post-split basis) under the Stock
Purchase Agreement to Coyote II and Coyote II has agreed to acquire such shares;
WHEREAS, pursuant to the Assignment Agreement, dated as of May 28,
1999, between BT and Coyote I, Coyote I has assigned its right to purchase
200,000 shares of Common Stock (on a post-split basis) under the Stock Purchase
Agreement to BT and BT has agreed to acquire such shares (such acquired shares,
the "BT Shares");
WHEREAS, pursuant to the Assignment Agreement, dated as of May 28,
1999, between CSFB and Coyote I, Coyote I has assigned its right to purchase
100,000 shares of Common Stock (on a post-split basis) under the Stock Purchase
Agreement to CSFB and CSFB has agreed to acquire such shares (such acquired
shares, the "CSFB Shares" and the BT Shares and CSFB Shares, together, the
"Restricted Shares"); and
WHEREAS, BT, CSFB and the Coyote Entities desire to impose certain
restrictions on the disposition and transfer of the Restricted Shares, to create
certain purchase and sale rights, to create certain registration rights and to
agree with respect to certain matters relating to the voting of the Restricted
Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I
1.1. Restrictions on Transfer
------------------------
Whether or not permitted under the Securities Act, no Restricted
Shares may be pledged, hypothecated, sold, transferred or otherwise disposed of,
except as expressly provided in this Agreement, by will or by the laws of
descent and distribution. Each Assignee Purchaser agrees not to distribute the
Restricted Shares to its members or shareholders, as the case may be, except as
may be required by law. In case of a transfer of any of the Restricted Shares
pursuant to the foregoing, the transferee must execute an agreement to be bound
by provisions of this Agreement as if such transferee were an original party
hereto. The foregoing restrictions shall not prohibit sales by any Assignee
Purchaser (a "Permitted Transfer") to the Company or the Coyote Entities or an
affiliate thereof (the Coyote Entities or any affiliate thereof, collectively,
"Coyote") or an affiliate of the Assignee Purchaser.
ARTICLE II
DRAG-ALONG RIGHT
(a) If Coyote transfers to any Person or Persons (other than an
affiliate thereof) (such Person, the "Article II Transferee"), pursuant to a
stock sale, merger or otherwise, shares of Common Stock then held by Coyote,
Coyote shall be entitled, at its option, to require each Assignee Purchaser to
sell an Article II Equivalent Portion (as defined below) of all Common Stock
held by such Assignee Purchaser, by providing each Assignee Purchaser with
written notice ("Drag-Along Notice") at least fifteen days prior to consummation
of the proposed transaction, setting forth in reasonable detail the material
terms and conditions of the proposed transaction or offering, and the price per
share at which each Assignee Purchaser shall be required to sell its shares of
Common Stock (which price per share shall be equal to the same price per share
Coyote shall receive pursuant to the proposed transaction). An "Article II
Equivalent Portion" shall mean with respect to each Assignee Purchaser that
portion of all shares of Common Stock then held by such Assignee Purchaser
expressed as a fraction where the numerator equals the number of shares of
Common Stock proposed to be sold by Coyote pursuant to the Drag-Along Notice and
the denominator equals all shares of Common Stock held by Apollo.
(b) At the closing of the proposed transaction (notice of the date,
place and time of which shall be designated by Coyote and provided to each
Assignee Purchaser in writing at least five business days prior thereto), each
Assignee Purchaser shall deliver certificates evidencing the shares of Common
Stock to be sold by such Assignee Purchaser, duly endorsed for transfer to the
proposed transferee, against the purchase price therefor. Such shares of Common
Stock shall be delivered free and clear of all liens, charges, encumbrances and
other security interests. Coyote shall have no
2
<PAGE>
liability or obligation to deliver the purchase price payable pursuant to this
Article II, except to the extent that Coyote receives the consideration thereof
from the proposed purchaser. All consideration payable pursuant to this Section
shall be payable in the same form as the consideration received from the Article
II Transferee; provided, that each Assignee Purchaser shall not be required,
--------
pursuant to the terms of such sale, to accept any consideration that would cause
such Assignee Purchaser to have a Regulatory Problem (as defined below). In case
of a potential Regulatory Problem, Coyote may, at its option, elect to pay or
cause to be paid to such Assignee Purchaser the cash equivalent of the
consideration payable pursuant to this Article II, as determined in good faith
by Coyote, in lieu of the consideration offered by the offeree. For purposes
hereof, a "Regulatory Problem" shall mean, with respect to any Person, any set
of facts, events or circumstances the existence of which would cause such Person
to believe that there is a substantial risk of assertion by a governmental
entity (which belief shall be based on an opinion of counsel) that such Person
is or would be in violation of the Bank Holding Company Act of 1956, as amended
by Regulation Y promulgated thereunder.
(c) Coyote may assign its rights pursuant to this Article II to the
Company or any affiliate or successor of the Company.
ARTICLE III
TAG-ALONG RIGHT
(a) From and after the time the Threshold (as defined in Section 7.10
hereof) has been reached, and to the extent in excess thereof, if Coyote
transfers to any Person or Persons (other than an affiliate thereof) shares of
Common Stock (the "Article III Transferee"), then (i) at least fifteen business
days prior to the consummation of the proposed transaction Coyote shall give
written notice ("Tag-Along Notice") to each Assignee Purchaser setting forth in
reasonable detail the material terms and conditions of the proposed transfer,
the number of shares of Common Stock to be sold and the price per share at which
Coyote is selling and (ii) each Assignee Purchaser shall have the right to
include an Article III Equivalent Portion (as defined) of all Common Stock held
by such Assignee Purchaser in the proposed transaction by providing a written
notice of exercise to Coyote at any time on or before ten business days
following delivery of the Tag-Along Notice to such Assignee Purchaser. An
"Article III Equivalent Portion" shall mean with respect to each Assignee
Purchaser that portion of all shares of Common Stock then held by such Assignee
Purchaser expressed as a fraction where the numerator equals the number of
shares of Common Stock proposed to be sold by Coyote, as set forth in the Tag-
Along Notice, and the denominator equals all shares of Common Stock then held by
Coyote.
(b) At the closing of the proposed transaction (notice of the date,
place and time of which shall be designated by Coyote and provided to each
Assignee Purchaser in writing at least five business days prior thereto), each
Assignee Purchaser shall deliver certificates evidencing the shares of Common
Stock owned by such
3
<PAGE>
Assignee Purchaser, duly endorsed for transfer to the proposed purchaser,
against delivery of the purchase price therefor. Such shares of Common Stock
shall be delivered free and clear of all liens, charges, encumbrances and other
security interests. Coyote shall not have any liability or obligation to deliver
the purchase price payable pursuant to this Section, except to the extent that
Coyote receives the consideration thereof from the Article III Transferee. All
consideration payable to the Assignee Purchasers pursuant to this Section shall
be payable in the same form as the consideration received from the Article III
Transferee.
ARTICLE IV
INCIDENTAL REGISTRATION
(a) From and after the time the Threshold has been reached, and to the
extent in excess thereof, if the Company at any time proposes to register any
Common Stock in a Public Offering for the account of Coyote (except with respect
to registration statements on a form which is not available for registering
Common Stock for sale to the public), each such time it will give at least ten
days prior written notice to each Assignee Purchaser of its intention so to do
including the number of shares of Common Stock proposed to be registered by
Coyote. Upon the written request of any such Assignee Purchaser, received by the
Company within ten days after the giving of any such notice by the Company, to
register up to its Article IV Equivalent Portion (as defined below) of all
Common Stock held by such Assignee Purchaser (which request shall state the
intended method of disposition thereof), the Company will use all commercially
reasonable efforts to cause the shares of Common Stock as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by the Company, all to the
extent requisite to permit the sale by such Assignee Purchaser (in accordance
with its written request) of such shares of Common Stock so registered.
Alternatively, the Company may in its sole discretion include such shares of
Common Stock in a separate registration statement to be filed concurrently with
the registration statement for the account of Coyote to be filed by the Company.
In the event that any registration pursuant to this Article IV shall be, in
whole or in part, an underwritten Public Offering of shares of Common Stock, the
number of shares of Common Stock to be included in such an underwriting may be
reduced (pro rata among the requesting Assignee Purchasers and Coyote based upon
the number of shares of Common Stock owned by such Assignee Purchasers and
Coyote) due to (i) the provisions of any registration rights or similar
agreement between the Company and any Coyote Entity or between the Company and
any management shareholders (it being understood that the Coyote Entities and
certain management shareholders shall have pro rata rights with respect to
incidental registration rights pursuant to (x) the registration rights agreement
by and among the Company and the Coyote Entities, dated as of the date hereof,
and (y) that certain shareholders agreement, dated as of the date hereof, among
the Company, APL Limited and the Coyote Entities and (z) that certain
shareholders agreement, dated as of the date hereof, among the Company, the
Coyote Entities and certain management shareholders), or (ii) if applicable,
underwriter market
4
<PAGE>
limitations if, and to the extent, that the managing underwriter advises the
Company that in its opinion such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein. In addition, if the
managing underwriter so advises, for any reason, against the inclusion of all or
any portion of shares or Common Stock owned by the Assignee Purchasers in the
Public Offering, then the Assignee Purchasers shall only have the right to
register shares of Common Stock therein as so advised by the managing
underwriter. An "Article IV Equivalent Portion" shall mean with respect to each
Assignee Purchaser that portion of all shares of Common Stock then held by such
Assignee Purchaser expressed as a fraction where the numerator equals the number
of shares of Common Stock proposed to be registered by Coyote pursuant to the
notice contemplated by this paragraph (a) and the denominator equals all shares
of Common Stock then held by Coyote.
(b) In connection with each registration pursuant to paragraph (a)
covering a Public Offering, each Assignee Purchaser selling Common Stock
pursuant thereto agrees to (i) enter into a written agreement with the managing
underwriter under the same terms and conditions as apply to the Company or the
selling shareholders, as applicable, or as is otherwise customary in offerings
of this type and (ii) furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary and shall be requested by the Company in order to comply with
federal and applicable state securities laws.
(c) If, at any time after giving notice of its intention to register
any stock pursuant to this Article IV and prior to the effective date of the
registration statement filed in connection with such registration, the Company
and/or Coyote shall determine for any reason not to register any such stock, the
Company shall give written notice to the Assignee Purchasers and, thereupon,
shall be relieved of its obligation to register any shares of Common Stock in
connection with such registration. If the number of shares to be registered by
Coyote is changed, the Article IV Equivalent Proportion shall be appropriately
adjusted.
(d) All expenses incurred by the Company in complying with this
Article IV, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars and costs of insurance, but excluding any Selling
Expenses, are herein referred to as "Registration Expenses." "Selling Expenses"
as used herein mean all underwriting discounts and selling commissions
applicable to the sale of Common Stock.
The Company will pay all Registration Expenses in connection with each
registration statement under this Article IV. All Selling Expenses in
connection with each registration statement under this Article IV shall be borne
by the participating sellers of shares of Common Stock in proportion to the
number of shares sold by each, or by
5
<PAGE>
such participating sellers of shares of Common Stock other than the Company
(except to the extent the Company shall be a seller of shares of Common Stock)
as they may agree. In addition, the participating Assignee Purchasers shall be
responsible for fees and disbursements of their counsel.
(e) In the event of a registration of any Common Stock under the Act
pursuant to this Article IV, the Company will indemnify and hold harmless, to
the full extent permitted by law, each selling Assignee Purchaser, each
underwriter of such Common Stock thereunder and each other person, if any, who
controls a selling Assignee Purchaser or such underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against any losses, claims, damages, liabilities and expenses, joint or several,
to which a selling Assignee Purchaser, such underwriter or controlling person
may become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which Common Stock was registered
under the Act pursuant to this Article IV, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will pay or reimburse each selling Assignee
Purchaser, each such underwriter and each such controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
--------
however, that the Company (i) will not be liable in any such case if and to the
- -------
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information pertaining to a selling Assignee
Purchaser, underwriter or controlling person and furnished by such Assignee
Purchaser, any such underwriter or any such controlling person, as the case may
be, in writing specifically for use in such registration statement, prospectus,
amendment or supplement and (ii) will not be liable for amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, such consent not to
be unreasonably withheld or delayed.
(f) In the event of a registration of any Common Shares under the Act
pursuant to this Article IV, each selling Assignee Purchaser will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Act or otherwise, but only insofar as such losses, claims, damages or
liabilities (or actions in respect thereof), arise out of or are based upon an
untrue statement or alleged untrue statement or omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, made in reliance upon and in conformity
with
6
<PAGE>
information pertaining to such selling Assignee Purchaser, furnished in
writing to the Company by such Assignee Purchaser specifically for use in such
registration statement under which Common Stock was registered under the Act
pursuant to this Article IV, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, and will pay or
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the liability of each selling
-------- -------
Assignee Purchaser hereunder shall be limited to the proportion of any such
loss, claim, damage, liability or expense which is equal to the proportion that
the public offering price of the Common Stock sold by such Assignee Purchaser
under such registration statement bears to the total public offering price of
all securities sold thereunder, but not in any event to exceed the net proceeds
received by such Assignee Purchaser from the sale of Common Stock covered by
such registration statements and (ii) an Assignee Purchaser shall not be liable
for amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of such Assignee
Purchaser, such consent not to be unreasonably withheld or delayed.
(g) Promptly after receipt by an indemnified party hereunder of
written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Article IV and shall only relieve it from any liability which it
may have to such indemnified party under this Article IV if and to the extent
the indemnifying party is materially prejudiced by such omission. In case any
such action shall be brought against any indemnified party and the indemnified
party shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Article IV for any legal or other professional expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
-------- -------
include both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable fees and expenses of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred. No indemnifying party, in the defense of any
such claim or litigation against an indemnified party, shall consent to entry of
any judgment or enter into any settlement which does not
7
<PAGE>
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation, unless such indemnified party shall otherwise consent in
writing. An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim.
(h) In order to provide for just and equitable contribution in any
case in which either (i) an Assignee Purchaser exercises incidental registration
rights under this Article IV, or any controlling person of such Assignee
Purchaser makes a claim for indemnification pursuant to this Article IV but it
is judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and following the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that this Article IV provides
for indemnification in such case, or (ii) contribution under the Act may be
required on the part of such Assignee Purchaser or any such controlling person
in circumstances for which indemnification is provided under this Article IV;
then, and in each such case, the Company and such Assignee Purchaser shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion as is
appropriate to reflect both the relative benefit received by such Assignee
Purchaser and the Company and the relative fault of the Company and such
Assignee Purchaser; provided, however, that, in any such case, (A) such Assignee
Purchaser shall not be required to contribute any amount in excess of the public
offering price of all Common Stock offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation. For purposes of the preceding sentence, the relative benefit
received by such Assignee Purchaser or the Company shall be deemed to be in the
same proportion as the public offering price of Common Stock offered by such
Assignee Purchaser or the Company bears to the public offering price of all
securities offered by such registration statement; and the relative fault of the
Company and such Assignee Purchaser shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission of a material fact relates to information supplied by the Company or
by such Assignee Purchaser and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
ARTICLE V
VOTING PROXY
5.1. Definitions
-----------
(a) "Designated Actions" means (i) the voting of any Common Stock and
any action to be taken with respect to a matter properly brought before the
stockholders
8
<PAGE>
of the Company holding shares of Common Stock, including without limitation the
election of members of the Board of Directors of the Company, (ii) any action to
be taken by any holder of Common Stock in its capacity as a stockholder of the
Company under this Agreement, including without limitation any consent or waiver
relating to this Agreement and (iii) all actions taken in connection with any of
the actions referred to in clauses (i) and (ii) above.
(b) "Designated Shareholders" means each Assignee Purchaser and each
Person to whom the Common Stock of such Assignee Purchaser are sold or
transferred pursuant to the first two sentences of Section 1.5 above.
(c) "Proxyholder" means Joshua J. Harris or any additional or
successor Proxyholder as may be appointed by the Coyote Entities by written
notice to the Assignee Purchasers and the Company.
5.2. Designated Actions and Irrevocable Proxy
----------------------------------------
(a) Each Designated Shareholder, so long as he, she or it owns any
Common Stock, hereby agrees to take all Designated Actions in the manner that
the Proxyholder, in his sole and absolute discretion, shall direct, at any
annual or special meeting of stockholders of the Company, at any and all
adjournments thereof, and on any other occasion in respect of which the consent
of such Designated Shareholder with respect to his, her or its shares of Common
Stock may be given or may be requested or solicited by the Company or any other
Person, whether at a meeting, pursuant to the execution of a written consent,
under the Stock Purchase Agreement or otherwise, for all purposes in connection
with any Designated Action, and such Designated Shareholder hereby ratifies and
confirms all that such Proxyholder may do by virtue hereof.
(b) For purposes of effecting any Designated Action, each Designated
Shareholder does hereby irrevocably constitute and appoint the Proxyholder, his,
her or its true and lawful attorney, agent and proxy for and in his, her or its
name, place and stead, with the exclusive right to take all Designated Actions,
in such Proxyholder's sole and absolute discretion, at any annual or special
meeting of stockholders of the Company, at any and all adjournments thereof, and
on any other occasion in respect of which the consent of such Designated
Shareholder may be given or may be requested or solicited by the Company or any
other Person, whether at a meeting, pursuant to the execution of a written
consent, under the Stock Purchase Agreement or otherwise, for all purposes in
connection with any Designated Action, and such Designated Shareholder hereby
ratifies and confirms all that the Proxyholder may do by virtue hereof. Each
Designated Shareholder agrees with the Proxyholder that, without the prior
written consent of the Proxyholder, he, she or it will not, so long as this
Agreement shall be in effect with respect to any such Designated Shareholder,
take any Designated Action, appoint any Person other than the Proxyholder as
his, her or its attorney, agent or proxy with respect to such shares of Common
Stock, or take any action inconsistent with the appointment of
9
<PAGE>
the Proxyholder as his, her or its lawful attorney, agent and proxy, or the
exercise by the Proxyholder of the powers granted to him, hereunder.
(c) The parties hereto agree that, in taking or giving directions for
the taking of any Designated Action or in otherwise acting hereunder, the
Proxyholder shall have no responsibility in respect of the management of the
Company by directors for whom he shall have voted or for any action taken by any
such directors or for any action taken pursuant to any consent given or vote
cast by him or other action taken by him, and the Proxyholder's powers herein
shall be discretionary and any of them may be exercised from time to time when
he sees fit and without leave of any court or any other Person and the
Proxyholder may refrain from exercising any powers or rights from time to time
as he sees fit in each case irrespective of any relationship that the
Proxyholder or any of his Affiliates may have with any of the parties hereto
otherwise than pursuant to this Agreement.
(d) The powers granted pursuant to this Section 5.2, and the proxy
granted pursuant hereto, are coupled with an interest and shall be irrevocable
during the term of this Article V.
5.3. Termination
-----------
The agreements contained in this Article V shall terminate and be of
no further force and effect as of the earlier of (i) tenth anniversary of the
date hereof and (ii) the termination of this Agreement as contemplated by
Section 7.11 below.
ARTICLE VI
PREEMPTIVE RIGHTS
(a) In the event that the Company proposes to issue (a "Proposed
Issuance") any Common Stock to Coyote, other than pursuant to the exceptions
specified in paragraph (b) below, the Company shall deliver a notice, with
respect to such Proposed Issuance (the "Preemptive Notice"), to each Assignee
Purchaser setting forth the period of time within which the Preemptive Right
must be exercised (the "Acceptance Period") and the price, terms and conditions
of the Proposed Issuance. Each Assignee Purchaser shall have the right (the
"Preemptive Right"), exercisable as hereinafter provided, to participate in such
issuance of Common Stock ("Offered Securities") on a pro rata basis in
--- ----
accordance with the respective aggregate number of shares of Common Stock held
by such Assignee Purchaser on the date of such notice from the Company by
purchasing an amount of such Common Stock to be sold to Coyote pursuant to the
Proposed Issuance multiplied by a fraction, the numerator of which shall be the
aggregate number of shares of Common Stock owned by such Assignee Purchaser on
the date of such notice and the denominator of which shall be the total number
of shares of Common Stock outstanding on such date, such purchase to be at the
same price and on the same terms and conditions
10
<PAGE>
as the Proposed Issuance. The number of shares of Common Stock to be sold to
Coyote pursuant to the Proposed Issuance shall be calculated after first taking
into account the effect of the preemptive rights granted by the Company to
certain management shareholders pursuant to that certain Management
Shareholders' Agreement, dated as of May 28, 1999, by and among Coyote I, Coyote
II, the Company and certain management shareholders named therein.
(b) Anything to the contrary notwithstanding, the Preemptive Rights
provided for herein shall not be applicable to: (i) any Proposed Issuance of
Common Stock to Coyote, in an amount equal to (A) 100,000 (as appropriately
adjusted for splits, rollups, etc.) or fewer shares, in the aggregate or (B)(1)
the number of shares of Common Stock previously sold or otherwise transferred by
Coyote to members of management of the Company less (2) the number of shares of
Common Stock previously purchased by Coyote pursuant to the provisions of this
clause (i)(B); provided that in no event shall Coyote be entitled to repurchase
Common Stock with an aggregate purchase price in excess of $5,000,000 pursuant
to the provisions of this clause (i)(B); (ii) any stock split or Proposed
Issuance of Common Stock as a dividend.
(c) The Preemptive Rights shall be exercisable by delivery of notice
(the "Purchase Notice") to the Company given within the Acceptance Period set
forth in the Preemptive Notice. If an Assignee Purchaser shall fail to respond
to the Company within the Acceptance Period, such failure shall be regarded as a
rejection of such Assignee Purchaser's right to exercise such Assignee
Purchaser's Preemptive Right. The closing of any purchase by the Assignee
Purchasers under this Article VI shall be held at such time and place upon which
the parties to the transaction may agree. At such closing, the Assignee
Purchasers participating in the purchase shall deliver by certified bank check,
payment in full for such Common Stock and all parties to the transaction shall
execute such additional documents as are otherwise deemed necessary or
appropriate by the Company. At such closing, the Company may issue and sell to
Coyote such portion of the Common Stock which has not been purchased by Assignee
Purchasers pursuant to the exercise of their Preemptive Rights at the same price
and on the same terms and conditions as the Common Stock sold or proposed to be
sold to the Assignee Purchasers.
(d) In the event of a Proposed Issuance of Common Stock, which
Proposed Issuance is subject to the Preemptive Rights under this Article VI and
which is offered only in combination with the purchase of debt or debt
securities, then the Preemptive Rights shall apply to the combination and an
Assignee Purchaser exercising his Preemptive Right shall be entitled and
required to purchase his pro rata share of both the debt and equity components
--- ----
of such combination on the basis set forth above.
11
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.1. Assignment
----------
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors, assigns, heirs and personal
representatives. Unless otherwise expressly provided in this Agreement, neither
this Agreement nor any right or obligation hereunder of any party may be
assigned or delegated without the prior written consent of the other parties
hereto, provided, that any of the Coyote Entities may assign this Agreement to
an affiliate.
7.2. Entire Agreement
----------------
This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.
7.3. Notices
-------
All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
shall be deemed to have been given (a) when delivered personally to the
recipient, (b) one business day after being sent by reputable overnight courier
(charges prepaid) (regardless of whether the recipient refuses to accept
delivery), (c) five business days after being sent to the recipient by certified
or registered mail, return receipt requested and postage prepaid (regardless of
whether the recipient refuses to accept delivery) or (d) when sent to the
recipient by facsimile (followed promptly by courier or certified or registered
mail delivery). Deliveries should be directed as follows:
If to the Company or the Coyote Entities, to:
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Telephone: 212-515-3200
Telecopy: 212-515-3232
Attention: Joshua J. Harris
12
<PAGE>
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Telephone: 212-259-8000
Telecopy: 212-259-6333
Attention: Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
If to the Assignee Purchasers, to:
BT Capital Investors, L.P.
130 Liberty Street
New York, NY 10006
Telephone: 212-250-3709
Telecopy: 212-250-7651
Attention: Ethan Falcove
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Telephone: 212-701-3000
Telecopy: 212-269-5420
Attention: John A. Tripodoro, Esq.
and
Pacer International Equity Investors, LLC.
Eleven Madison Avenue
New York, NY 10010
Telephone: 212-325-2625
Telecopy: 212-325-8018
Attention: Mark Kennelley
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Telephone: 212-701-3000
Telecopy: 212-269-5420
Attention: John A. Tripodoro, Esq.
13
<PAGE>
7.4. Waivers; Amendments
-------------------
(a) No failure or delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(b) Any provision of this Agreement may be waived if, but only if,
such waiver is in writing and is signed, by the party or parties against whom
the waiver is to be effective. No provision of this Agreement may be amended or
otherwise modified except by an instrument in writing executed by the parties
hereto.
7.5. Counterparts
------------
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
7.6. Expenses
--------
All costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
7.7. Remedies
--------
Each party hereto acknowledges that the remedies at law of the other
parties for a breach or threatened breach of this Agreement would be inadequate
and, in recognition of this fact, any party to this Agreement, without posting
any bond, and in addition to all other remedies which may be available, shall be
entitled to obtain equitable relief in the form of specific performance, a
temporary restraining order, a temporary or permanent injunction or any other
equitable remedy which may then be available. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
7.8. Applicable Law; Submission to Jurisdiction
------------------------------------------
This Agreement (other than the provisions of Article V which shall be
construed in accordance with and governed by the laws of the State of Delaware)
shall be construed in accordance with and governed by the laws of the State of
New York, without regard to the conflicts of law rules of such state. Each of
the parties hereto hereby consents to the non-exclusive jurisdiction of the
United States District Court for the Southern District of New York, or any other
New York State court sitting in New York, New York (and of the appropriate
appellate courts therefrom) over any suit, action
14
<PAGE>
or proceeding arising out of or relating to this Agreement. Each party hereto
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue in any such court or that
any such proceeding which is brought in accordance with this Section has been
brought in an inconvenient forum. Subject to applicable law, process in any such
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing and
subject to applicable law, each party agrees that service of process on such
party as provided in Section 7.3 shall be deemed effective service of process on
such party. Nothing herein shall affect the right of any party to serve legal
process in any other manner permitted by law or at equity or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
WITH RESPECT TO A PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES IRREVOCABLY
WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT
IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING.
7.9. Severability
------------
The invalidity or unenforceability of any provisions of this Agreement
in any jurisdiction shall not affect the validity, legality or enforceability of
the remainder of this Agreement in such jurisdiction or the validity, legality
or enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
7.10. Certain Definitions
-------------------
(a) For purposes of this Agreement, a "Public Offering" means any
underwritten public offering of equity securities of the Company pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act") other than pursuant to a registration statement on Form S-4 or S-8
or any successor or similar form.
(b) For purposes of this Agreement, the "Threshold" means the public
or private sale by Coyote in any one or more transactions of $16 million, in the
aggregate, of Common Stock.
(c) For purposes of this Agreement, a "Person" shall mean an
individual, a partnership, a joint venture, a corporation, a limited liability
company, a trust, an unincorporated organization, a governmental entity or any
other entity.
7.11. Termination
-----------
This Agreement shall terminate at such time that Coyote shall own less
than 10% of the outstanding Common Stock on a fully diluted basis.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Purchase Agreement to be executed as of the date first above written.
PACER INTERNATIONAL, INC.
By: /s/ Donald C. Orris
________________________________________
Donald C. Orris
President and Chief Executive Officer
BT CAPITAL INVESTORS, L.P.
By: /s/ Joseph E. Wood
________________________________________
Name: Joseph E. Wood
Title: Managing Director
PACER INTERNATIONAL EQUITY INVESTORS, LLC.
By: /s/ Mark Patterson
________________________________________
Name: Mark Patterson
Title: Vice President
COYOTE ACQUISITION LLC
By: /s/ Marc Becker
________________________________________
Marc Becker
Vice President
COYOTE ACQUISITION II LLC
By: /s/ Marc Becker
________________________________________
Marc Becker
Vice President
16
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Acceptance Period 10
Act 15
Agreement 1
Article II Equivalent Portion 2
Article II Transferee 2
Article III Transferee 3
Article IV Equivalent Portion 5
Assignee Purchasers 1
BT 1
BT Shares 1
Common Stock 1
Company 1
Coyote 2
Coyote Entities 1
Coyote I 1
Coyote II 1
CSFB Shares 1
Drag-Along Notice 2
Offered Securities 10
Permitted Transfer 2
Person 15
Preemptive Notice 10
Preemptive Right 10
Proposed Issuance 10
Public Offering 15
Purchase Notice 11
Regulatory Problem 3
Restricted Shares 1
Stock Purchase Agreement 1
Tag-Along Notice 3
Threshold 15
</TABLE>
17
<PAGE>
EXHIBIT 4.15
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") made as of this 28th day
of May, 1999, by and between Pacer International, Inc., (formerly known as APL
Land Transport Services, Inc.), a Tennessee corporation, (the "Company") and
Apollo Management IV, L.P. ("Apollo").
WHEREAS, APL Limited and Coyote Acquisition LLC, a Delaware limited
liability company and an affiliate of Apollo ("Purchaser"), have entered into a
Stock Purchase Agreement (the "Purchase Agreement"), dated as of March 15, 1999,
providing for the purchase by Purchaser of substantially all of the capital
stock of the Company from APL Limited (the "Purchase"); and
WHEREAS, upon the consummation of the Purchase (the "Closing"), the
Company desires to retain the ongoing services of Apollo for financial and
strategic advice;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Appointment. The Company appoints Apollo, following the Closing,
-----------
to provide financial and strategic advice, subject to the direction of the Board
of Directors of the Company and the terms and conditions of this Agreement, and
Apollo hereby accepts the aforesaid appointment.
2. Duties. Apollo shall perform and provide all such financial and
------
strategic services to the Company as shall be reasonably requested by the Board
of Directors of the Company.
3. Term. The term of this Agreement shall commence at the Closing
----
and end on the first anniversary of the date thereof. This Agreement shall be
extended automatically on each anniversary of the Closing for an additional one
year period unless written notice of such non-extension is provided by either
party to the other party at least 30 days prior to such anniversary.
4. Compensation. (a) The Company shall pay Apollo, for services to
------------
be rendered hereunder, an initial fee of 1% of total equity value ("TEV") of the
transaction contemplated by the Purchase Agreement (calculated by subtracting
total debt from the aggregate purchase price), as it may be amended, at the
Closing ("Initial Payment"). Thereafter, the Company shall pay Apollo a fee of
$500,000 per annum ("Annual Fee") payable by the Company in equal quarterly
installments of $125,000 due
<PAGE>
on the last day of September, December, March and June of each year, subject to
appropriate proration for the first payment after the Closing.
(b) The Company shall pay Apollo a transaction fee of 1% of TEV of
any purchase, sale, recapitalization or similar transaction (whether by merger,
stock purchase or sale, asset purchase or sale or otherwise) completed by the
Company or by any affiliate thereof promptly upon the closing of such
transaction.
(c) The amounts payable under this Paragraph 4 shall be paid in cash
by wire transfer of immediately available funds.
5. Termination. Notwithstanding anything to the contrary contained
-----------
herein, each party hereto may terminate this Agreement without cause upon thirty
(30) calendar days' written notice (the "Termination Notice") to the other, said
notice to set forth the date of such termination, which date shall not be less
than thirty (30) days, nor more than sixty (60) days from the date of such
Termination Notice. Compensation owed to Apollo under this Agreement shall be
paid pro rata through the date of the Termination Notice.
6. Independent Contractor. Apollo is retained and employed as an
----------------------
advisor by the Company under this Agreement only for the purposes and to the
extent set forth herein, and the relation of Apollo to the Company is and shall
remain, during the term or terms hereof, that of an independent contractor.
7. Confidentiality. In furtherance of this Agreement, the Company
---------------
shall provide Apollo with all financial, business and other relevant information
about the Company reasonably requested by Apollo for the purpose of rendering
the services contemplated herein. All such information of a non-public or
confidential nature furnished to Apollo by the Company shall be treated as
confidential by Apollo. Apollo may rely, without independent verification, on
the accuracy and completeness of the information furnished to it by the Company
in furtherance of this Agreement.
8. Losses. None of Apollo, any of its employees, officers and
------
directors, any person controlling Apollo, or any of their respective agents or
affiliates shall be liable to the Company for any losses, claims, damages,
liabilities or expenses arising from, related to or in connection with this
Agreement or the Company's business or affairs.
9. Indemnification. The Company will indemnify and hold harmless
---------------
Apollo, its employees, officers and directors, persons controlling Apollo and
its and their respective agents and affiliates, from any and all liabilities,
claims, suits, judgments, damages or expenses arising out of, or in connection
with, any action taken under this Agreement by Apollo or any of its agents,
employees, officers or directors, except to the extent that any such
liabilities, claims, suits, judgments, damages or expenses are substantially
attributable to the gross negligence or willful misconduct of Apollo or any such
employee, officer, director, controlling person, agent or affiliate.
2
<PAGE>
10. Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and shall inure to the benefit of the parties hereto, and their respective
successors and assigns. Notwithstanding the foregoing, this Agreement may not
be assigned without the prior written consent of the parties hereto, except that
Apollo shall have the right to assign its rights, interests and obligations
hereunder to any of its affiliates at its sole option and without the prior
consent (written or otherwise) of the Company. This Agreement may be modified
by the parties hereto only by written supplemental agreement.
11. Choice of Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of New York without regard to any
choice of law provisions. Each of the parties hereto hereby irrevocably submits
in any legal action or proceeding relating to or arising out of this Agreement
or any other document relating hereto or delivered in connection with the
transactions contemplated hereby, or for recognition and enforcement of any
judgment in respect thereof, to the exclusive jurisdiction of the United States
District Court for the Southern District of New York and appellate courts
thereof. Each of the parties hereto further (a) consents that any such action
or proceeding may be brought in such court and waives any objection that it may
now or hereafter have to the venue of any such action or proceeding in such
court or that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same; (b) agrees that service of process in any
such action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to such party at its address set forth in Section 12 below; and
(c) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law.
12. Notices. All notices hereunder shall be in writing and shall be
-------
given to the respective parties by U.S. mail, personal delivery or facsimile
transmission to their respective addresses as follows:
If to the Company:
c/o Donald C. Orris
1675 Larimer Street
Suite 620
Denver, Colorado 80202
Facsimile: (303) 623-5115
If to Apollo:
1301 Avenue of the Americas
New York, New York 10019
Attn: Joshua J. Harris
Facsimile: (212) 261-4102
3
<PAGE>
with a copy to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 259-6333
All such notices shall be deemed effective upon receipt.
13. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PACER INTERNATIONAL, INC.
(formerly known as APL LAND
TRANSPORT SERVICES, INC.)
By: /s/ Donald C. Orris
----------------------------------
Name: Donald C. Orris
Title: President, Chairman, CEO
APOLLO MANAGEMENT IV, L.P.
BY AIF IV MANAGEMENT, INC.,
its general partner
By: /s/ Joshua Harris
----------------------------------
Name: Joshua Harris
Title: Vice President
5
<PAGE>
Exhibit 4.16
TAX SHARING AGREEMENT
---------------------
THIS TAX SHARING AGREEMENT (the "Agreement"), dated as of May 28, 1999, is
by and among Coyote Acquisition LLC, a Delaware limited liability company
("Holding Company"), Pacer International, Inc., a Tennessee corporation
(formerly known as APL Land Transport Services, Inc.) ("Company," together with
any subsidiary thereof, including any subsidiary acquired or formed subsequent
to the date hereof), and Pacer Logistics, Inc., a Delaware corporation (formerly
known as Pacer International, Inc.) ("Subsidiary," together with any subsidiary
thereof, including any subsidiary acquired or formed subsequent to the date
hereof).
WITNESSETH:
WHEREAS, upon the consummation of the transactions described in the Stock
Purchase Agreement, dated as of March 15, 1999, Holding Company will own
approximately eighty-five percent (85%) of the issued and outstanding shares of
Company's common stock, no par value, and upon the consummation of the
transactions described in the Agreement and Plan of Merger, dated as of February
22, 1999, Company will own approximately one-hundred percent (100%) of the
issued and outstanding shares of Subsidiary's common stock, par value $.01 per
share, and none of the issued and outstanding shares of Subsidiary's preferred
stock, par value $.01 per share;
WHEREAS, following the consummation of the transactions described above,
two or more of the parties hereto may become members of an affiliated group
within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and, perhaps, one or more consolidated, combined or
unitary groups for state, local and/or foreign tax purposes ("Group");
<PAGE>
WHEREAS, two or more of the parties hereto, at Holding Company's option,
may file consolidated federal income tax returns ("Federal Consolidated
Returns") and, perhaps, consolidated, combined and/or unitary tax returns for
state, local and/or foreign tax purposes ("Other Consolidated Returns," and,
collectively with Federal Consolidated Returns, "Consolidated Returns"); and
WHEREAS, it is the intent and desire of the parties hereto that a method be
established for allocating the Group's tax liability among its members; for
reimbursing Holding Company (or any other entity designated by Holding Company)
for the payment of any such tax liability; and for reimbursing members for the
use of net operating losses and other tax benefits to reduce the Group's tax
liability otherwise payable.
NOW, THEREFORE, in consideration of the promises, covenants and agreements
contained herein, the parties hereto agree as follows:
1. Filing of Consolidated Returns. At Holding Company's option, Holding
------------------------------
Company (or any other entity designated by Holding Company) may file, and
Company and Subsidiary agree to join in any such filing of, (i) a Federal
Consolidated Return for any taxable year (or portion thereof) for which the
Group is permitted or required to file a Federal Consolidated Return and/or (ii)
any Other Consolidated Return for any taxable year (or portion thereof) for
which the Group is permitted or required to file a Consolidated Return.
2. Cooperation on Consolidated Return Matters. Company and Subsidiary
------------------------------------------
hereby designate Holding Company (or Holding Company's designee) as their agent
for the purpose of taking any and all action necessary or incidental to the
filing of
2
<PAGE>
Consolidated Returns. Company and Subsidiary agree to furnish Holding Company
with any and all information requested by Holding Company in order to carry out
the provisions of this Agreement; to cooperate with Holding Company in any tax
return or consent contemplated by this Agreement; to take such action with
respect to such returns as Holding Company may request, including, without
limitation, the filing of all elections and the filing of all requests for the
extension of time within which to file tax returns; to cooperate in connection
with any audit or refund claim; and to undertake all of the foregoing
obligations in a timely manner as requested by Holding Company.
3. Apportionment of Taxes. For each taxable period (or portion thereof)
----------------------
for which a Federal Consolidated Return is filed for the Group pursuant to this
Agreement, the consolidated federal income tax liability of the Group, as
determined under Treasury Regulations (S) 1.1502-2 and the remaining
consolidated return regulations, will be apportioned among the members of the
Group pursuant to Treasury Regulations (S) 1.1552-1(a)(1) in accordance with the
ratio which that portion of the consolidated taxable income attributable to each
member of the Group bears to the consolidated taxable income; provided, however,
-------- -------
in the event that Holding Company (including any member of the Group other than
Company or Subsidiary) has no taxable income, the sum of the apportioned tax
liabilities of Company and Subsidiary hereunder shall, at a minimum, always
equal the consolidated federal income tax liability of the Group, and in the
event that none of Company or Subsidiary has any taxable income, the tax
liability of Holding Company hereunder shall, at a minimum, always equal the
consolidated federal income tax liability of the Group.
3
<PAGE>
4. Payment of Taxes. For each taxable period (or portion thereof) for
----------------
which a Federal Consolidated Return is filed for the Group pursuant to this
Agreement, Holding Company shall prepare or cause to be prepared the Federal
Consolidated Return of the Group and shall pay all taxes (including any
penalties, fines, interest or other additions thereto) reported on such Federal
Consolidated Return to the Internal Revenue Service ("IRS"). At least five (5)
business days prior to the due date of any payment Holding Company is required
to make to the IRS of any taxes due with respect to a Federal Consolidated
Return of the Group (including, without limitation, estimated taxes), Company
and/or Subsidiary, as the case may be, shall pay to Holding Company an amount
equal to its share of such tax liability as determined under Section 3 of this
Agreement.
5. Tax Benefit. For each taxable period (or portion thereof) for which a
-----------
Federal Consolidated Return is filed for the Group pursuant to this Agreement,
Holding Company shall elect (if necessary) in the manner specified in Treasury
Regulations (S) 1.1502-33(d)(5) that the method described in Treasury
Regulations (S) 1.1502-33(d)(3) be applied to the Group with respect to
additional allocations of income tax liability. Pursuant to Treasury
Regulations (S) 1.1502-33(d)(3), an additional liability will be allocated to
each member of the Group which, as a result of net operating losses, excess
charitable contributions, foreign tax credits, investment tax credits or similar
items arising from or generated by the activities of another member with respect
to a taxable period (or portion thereof) for which a Federal Consolidated Return
was filed, has an allocated tax liability as determined under Section 3 of this
Agreement that is smaller than its tax liability if such tax liability had been
computed on a separate tax return
4
<PAGE>
("Separate Return Tax Liability"). The additional tax liability allocated to
such member will be equal to 100 percent of the excess, if any, of (a) the
Separate Return Tax Liability of such member for the taxable year, over (b) the
allocated tax liability as determined under Section 3 above. The total of any
additional amounts determined in this Section 5 will be paid to such member that
generated such losses, credits or deductions to which such total is
attributable. Such payment will be made pursuant to a consistent method which
reasonably reflects such items and which is substantiated by specific records
maintained by the Group for such purposes.
6. Subsequent Adjustments. If for any taxable period (or portion
----------------------
thereof) for which a Federal Consolidated Return is filed for the Group pursuant
to this Agreement the federal income tax liability of the Group as reported on
such Federal Consolidated Return is adjusted, whether by means of an amended
return, a claim for refund, or an audit by the IRS, then the liabilities of the
members of the Group shall be recomputed under the relevant sections of this
Agreement to give effect to those adjustments as if such adjustments had been
part of the original determination of the Group's consolidated federal income
tax liability. In the case of a refund, Holding Company shall make a payment to
each member of the Group in an amount equal to such member's share of the
refund, if any, within five (5) business days after the refund is received by
Holding Company and, in the case of an increase in tax liability, each member of
the Group shall pay to Holding Company its allocable share of such increased tax
liability at least five (5) business days prior to the date on which Holding
Company reasonably expects to pay such liability to the IRS. If any interest is
to be paid or received as a result of any tax deficiency or refund, that
interest shall be allocated among
5
<PAGE>
the members of the Group in the ratio that each such member's change in income
tax liability bears to the total change in the income tax liability of the
Group. If any penalty is to be paid or received as a result of any tax
deficiency or refund, that penalty shall be allocated to the member whose income
resulted in the imposition of such penalty.
7. Election for Computing Earnings and Profits. For each taxable period
-------------------------------------------
(or portion thereof) for which a Federal Consolidated Return is filed for the
Group pursuant to this Agreement, Holding Company shall elect (if necessary) in
the manner specified in Treasury Regulations (S) 1.1552-1(c) that the Group's
consolidated federal income tax liability be apportioned for purposes of
computing earnings and profits in accordance with the method provided in Section
1552(a)(1) of the Code and Treasury Regulations (S) 1.1552-1(a)(1).
8. Other Tax Items. This Agreement shall not apply with respect to the
---------------
carryback of any net operating loss, tax credit or other tax benefit generated
by a party and attributable to a taxable year beginning after the date hereof in
which such party is not a member of the Group.
9. Other Consolidated Returns. Each member of the Group agrees to, at
--------------------------
the request of Holding Company, join with Holding Company (or any direct or
indirect subsidiary of Holding Company (if any)) in any Other Consolidated
Return for any taxable period (or portion thereof) for which Holding Company (or
any direct or indirect subsidiary of Holding Company (if any)) elects to file an
Other Consolidated Return that includes such member. If at any time subsequent
to the date hereof, the liability for any state, local or foreign income,
franchise or other tax of Holding Company, Company, Subsidiary and/or any other
affiliated corporation (if any) is determined on a unitary,
6
<PAGE>
consolidated, group or combined basis (or any member becomes responsible for the
payment of any such tax), this Agreement shall be applied to such state or local
tax in like manner as it is applied to matters relating to federal income taxes,
after taking into consideration the extent to which each party has been included
in an Other Consolidated Return that relates to those taxes and other relevant
issues.
10. Disputes. Any dispute concerning the interpretation of a Section or
--------
an amount of payment due under this Agreement shall be resolved by Holding
Company, whose reasonable judgment shall be conclusive and binding on the
parties.
11. Successors. A party's rights and obligations under this Agreement
----------
may not be assigned without the prior written consent of the other party to this
Agreement. This Agreement shall be binding upon and inure to the benefit of any
successor to any party hereto.
12. Exclusive Agreement. This Agreement embodies the entire
-------------------
understanding among the parties as to the subject matter hereof, and no change
or modification may be made except in writing by each of the parties.
13. Waivers. The waiver of a breach of any term or condition of this
-------
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
14. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
15. Choice of Law; Amendments; Headings; Jurisdiction. This Agreement
-------------------------------------------------
shall be governed by the internal laws of the State of New York. This Agreement
may
7
<PAGE>
not be amended or modified orally. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
COYOTE ACQUISITION LLC,
a Delaware limited liability company
By: /s/ Marc E. Becker
__________________________________
Name: Marc E. Becker
Title: Vice President
PACER INTERNATIONAL, INC., a Tennessee
corporation (formerly known as APL Land
Transport Services, Inc.)
By: /s/ Donald C. Orris
_________________________________
Name: Donald C. Orris
Title: Chairman, President and Chief
Executive Officer
PACER LOGISTICS, INC., a Delaware
corporation (formerly known as
Pacer International, Inc.)
By: /s/ Donald C. Orris
_________________________________
Name: Donald C. Orris
Title: Chairman, President and Chief
Executive Officer
9
<PAGE>
EXHIBIT 4.17
$150,000,000
Pacer International, Inc.
11 3/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
May 24, 1999
<PAGE>
May 24, 1999
Morgan Stanley & Co. Incorporated
BT Alex. Brown Incorporated
Credit Suisse First Boston Corporation
Credit Lyonnais Securities (USA) Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Each of Pacer International, Inc., a Tennessee corporation (f/k/a APL
Land Transport Services, Inc., the "Company"), and the subsidiary guarantors
listed on Schedule A hereto (the "Guarantors" and, together with the Company,
the "Issuers"), propose to issue and sell to the several purchasers named in
Schedule B hereto (the "Placement Agents") $150,000,000 aggregate principal
amount of the Company's 11 3/4% Senior Subordinated Notes due 2007 (the "Notes")
which Notes will be jointly and severally guaranteed (the "Guarantees" and,
together with the Notes, the "Securities") on a senior subordinated basis by the
Guarantors. The Notes are to be issued pursuant to the provisions of an
indenture to be dated as of May 28, 1999 (the "Indenture") by and among the
Company, the Guarantors and Wilmington Trust Company, as trustee (the
"Trustee").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act and in offshore transactions in reliance
on Regulation S under the Securities Act ("Regulation S").
Securities issued in book-entry form will be issued to Cede & Co. as
nominee of The Depositary Trust Company ("DTC") pursuant to a letter agreement
(the "DTC Agreement"), to be dated as of the Closing Date (as defined in Section
4), among the Company, the Guarantors, the Trustee and DTC.
The Placement Agents and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement, substantially in
the form attached hereto as Exhibit A, dated as of the Closing Date among the
Company, the Guarantors and the Placement Agents (the "Registration Rights
Agreement").
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum dated May 7, 1999 (the "Preliminary
Memorandum") and will prepare a final offering memorandum dated May 24, 1999
(the "Final Memorandum" and each of the Final Memorandum and the Preliminary
Memorandum, a "Memorandum")
-2-
<PAGE>
including or incorporating by reference a description of the terms of the
Securities, the terms of the offering of the Securities and a description of the
Company.
The offering of the Securities is part of the financing that will be
used to consummate the recapitalization of the Company (the "Recapitalization")
which will be effected through (i) the purchase of shares of the Company's
outstanding common stock by Coyote Acquisition LLC ("Coyote"), an entity formed
by certain affiliates of Apollo Management L.P. ("Apollo"), (ii) the redemption
by the Company of certain of its shares of common stock held by APL Limited and
(iii) the formation of a transitory subsidiary which will be merged with and
into Pacer Logistics, Inc. (f/k/a Pacer International, Inc., "Pacer") whereby
Pacer will become a wholly-owned subsidiary of the Company.
In connection with the Recapitalization, the Company will execute an
agreement (the "Credit Agreement") with Bankers Trust Company, Morgan Stanley &
Co. Incorporated and Credit Suisse First Boston Corporation, as agents, and
certain other lenders to provide the Company a loan commitment of up to
$235,000,000. Additionally, in connection with the Recapitalization, certain
affiliates of Apollo Management, L.P. and APL Limited shall make an equity
investment in the Company, as described in the Final Memorandum (the "Equity
Investment").
The offering of the Securities, the Recapitalization, the Equity
Investment and the related borrowings under the Credit Agreement are
collectively referred to herein as the "Transactions." This agreement (this
"Agreement" or the "Purchase Agreement"), the Indenture, the Notes, the
Guarantees, the Securities, the Registration Rights Agreement and the DTC
Agreement and each of the Exchange Notes and the Private Exchange Notes (as
defined in the Registration Rights Agreement) and the related guarantees thereof
are referred to collectively as the "Operative Documents."
This Agreement is being entered into by Coyote on the date hereof.
Simultaneously with the closing of the Transactions (each of which is deemed to
have occurred simultaneously with the closing of the others), each of the
Issuers shall enter into the Joinder Agreement, substantially in the form of
Exhibit C, (the "Joinder Agreement") pursuant to which each such Issuer will
observe and perform all of the rights, obligations and liabilities of an Issuer
as provided in this Agreement as if it were an original signatory hereto. Upon
the execution and delivery of the Joinder Agreement, Coyote shall be fully,
unconditionally, and irrevocably released from all rights, obligations and
liabilities hereunder.
1. Representations and Warranties. Coyote and each of the Issuers,
jointly and severally, represents and warrants to, and agrees with, each
Placement Agent that:
(a) Neither the Final Memorandum nor any amendment or supplement
thereto, as of the date thereof and the Closing Date, contains or will
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not
-3-
<PAGE>
misleading, except that the representations and warranties set forth in
this paragraph do not apply to statements or omissions in the Final
Memorandum (or any such amendment or supplement thereto) based upon
information relating to any Placement Agent furnished to the Company in
writing by or on behalf of such Placement Agent expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the requisite corporate power and authority to own or
lease its property and to conduct its business as now conducted and as
described in the Final Memorandum and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the
business, condition (financial or other), or results of operations of the
Issuers and their respective subsidiaries, taken as a whole (a "Material
Adverse Effect").
(c) Each Guarantor and its material subsidiaries has been duly
organized, is validly existing as a corporation or limited liability
company in good standing under the laws of the jurisdiction of its
organization, has the requisite power and authority to own its property and
to conduct its business as described in the Final Memorandum, if at all,
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not result in a
Material Adverse Effect.
(d) This Agreement has been duly authorized, executed and delivered
by Coyote and as of the Closing Date by each of the Issuers.
(e) As of the Closing Date, the Notes, the Exchange Notes and the
Private Exchange Notes will have been duly authorized by the Company and,
when executed and authenticated in accordance with the provisions of the
Indenture and, in the case of the Notes, delivered to and paid for by the
Placement Agents in accordance with the terms of this Agreement, will be
valid and legally binding obligations of the Company, enforceable against
the Company in accordance with their terms, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at law)
and (iii) public policy considerations, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement. No holder
of securities of any of the Issuers will be entitled to have such
securities registered under the
-4-
<PAGE>
registration statements required to be filed by any of the Issuers pursuant
to the Registration Rights Agreement, other than as expressly permitted
thereby.
(f) As of the Closing Date, the Guarantees will have been duly
authorized by each of the Guarantors and, upon the execution,
authentication and delivery of the Notes and payment therefor in accordance
with the terms of this Agreement, will have been duly executed and
delivered, will be entitled to the benefits of the Indenture and will
constitute a valid and legally binding obligation of each of the
Guarantors, enforceable against each of the Guarantors in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditor's
rights generally, (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought (regardless
of whether such enforcement is considered in a proceeding in equity or at
law) and (iii) public policy considerations.
(g) As of the Closing Date, each of the Indenture and Registration
Rights Agreement will have been duly authorized by each of the Issuers and
when executed and delivered by each of the Issuers (with respect to the
Indenture, assuming the due authorization, execution, and delivery thereof
by the Trustee) in accordance with the terms of this Agreement will be,
valid and legally binding obligations of each of the Issuers, enforceable
against each of the Issuers in accordance with its respective terms, (A)
subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law) and (iii) public policy considerations and
(B) except as rights to indemnification and contribution under the
Registration Rights Agreement may be limited by federal and state
securities laws and public policy considerations.
(h) The execution and delivery by each of the Issuers of, and the
performance by each of the Issuers of the Transactions and its respective
obligations under the Operative Documents, will not contravene any
provision of applicable law or the certificate of incorporation, by-laws or
other organizational document of any of the Issuers or any of the
Agreements and Instruments (as defined in Section 1(o)) binding upon any of
the Issuers that is material to any of the Issuers, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over any of the Issuers, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for
the performance by any of the Issuers of the Transactions or their
respective obligations under any of the Operative Documents, which, if
contravened, individually or in the aggregate, would have a Material
Adverse Effect, and except such as may be required by the Securities Act,
state securities or
-5-
<PAGE>
"Blue Sky" laws in connection with the purchase and initial resale of the
Securities by the Placement Agents other than as contemplated by the
Registration Rights Agreement.
(i) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under
this Agreement and the other Operative Documents and to consummate the
Transactions and any other transactions contemplated hereby and thereby,
including, without limitation, the power and authority to issue, sell and
deliver the Securities as contemplated by this Agreement.
(j) As of the Closing Date, the Company will have the authorized,
issued and outstanding capital stock as set forth under the caption
"Capitalization" in the Final Memorandum. All of the shares of issued and
outstanding capital stock of each of the Issuers have been duly authorized
and validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of any of the Issuer was issued in
violation of any preemptive or other similar rights of any securityholder
of any such Issuer; and except as disclosed in the Final Memorandum, all of
the outstanding shares of capital stock of each of the Issuers are owned
free and clear of all liens, encumbrances, equities and claims or
restrictions on transferability or voting (other than those imposed by the
Securities Act, the securities or "Blue Sky" laws of certain jurisdictions
and the Shareholders Agreements dated as of the Closing Date, among (i) APL
Limited, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company,
(ii) certain management shareholders, Coyote Acquisition LLC, Coyote
Acquisition II LLC and the Company and (iii) certain affiliates of certain
of the Placement Agents, Coyote Acquisition LLC, Coyote Acquisition II LLC
and the Company. The Company does not own, directly or indirectly, any
shares of stock or any other equity or long-term debt securities or have
any equity interest in any firm, partnership, joint venture or other entity
other than interests in its subsidiaries or as described in the Final
Memorandum.
(k) Subsequent to the respective dates as of which information is
given in the Final Memorandum and except as described therein (A) none of
the Issuers will have incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions, not in the
ordinary course of business and (B) there shall not be any material change
in the capital stock (other than changes in the ordinary course of
business) or long-term indebtedness of any of the Issuers.
(l) Except as described in the Final Memorandum, there is not pending
or, to the knowledge of any Issuer, threatened, any action, suit,
proceeding, inquiry or investigation to which any Issuer is a party, or to
which the property of any Issuer is subject, before or brought by any court
or governmental agency or body, which could reasonably be expected to have
a Material Adverse Effect.
-6-
<PAGE>
(m) Except as would not, singly or in the aggregate, have a Material
Adverse Effect (A) each of the Issuers is in compliance with applicable
Environmental Laws (as defined below), (B) each of the Issuers has made all
filings and provided all notices required under any applicable
Environmental Law, and has and is in compliance with all permits required
under any applicable Environmental Laws and each of them is in full force
and effect, (C) there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the
knowledge of any of the Issuers, threatened against any of the Issuers
under any Environmental Law, (D) no lien, charge, encumbrance or
restriction has been recorded under any Environmental Law with respect to
any assets, facility or property owned, operated, leased or controlled by
any of the Issuers, (E) none of the Issuers has received notice that it has
been identified as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state law and (F) no property or facility of
any of the Issuers is (i) listed or proposed for listing on the National
Priorities List under CERCLA or (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System List
promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or
employee health and safety or the environment, including, without
limitation, laws relating to (i) emissions, discharges, releases or
threatened releases of hazardous materials into the environment (including,
without limitation, ambient air, surface water, ground water, land surface
or subsurface strata), (ii) the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transport or handling of
hazardous materials, and (iii) underground and above ground storage tanks
and related piping, and emissions, discharges, releases or threatened
releases therefrom.
(n) Each of the Operative Documents will conform in all material
respects to the respective statements relating thereto contained in the
Final Memorandum; the statements in the Final Memorandum under the caption
"Certain United States Federal Income Tax Considerations," insofar as such
statements constitute a summary of the United States federal tax laws
referred to therein, are accurate and fairly summarize in all material
respects the United States federal tax laws referred to therein.
(o) None of the Issuers is in violation of its charter, by-laws or
other organizational document or in violation of any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over any of the Issuers or any of their
-7-
<PAGE>
respective properties or assets or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which any of the Issuers is
a party or by which any of them may be bound, or to which any of the
property or assets of any of the Issuers is subject (collectively,
"Agreements and Instruments") except for such violations and defaults that
would not result in a Material Adverse Effect.
(p) No strike, labor dispute, slowdown or work stoppage with the
employees of any of the Issuers exists or, to the knowledge of any of the
Issuers, is pending or threatened which may reasonably be expected to
result in a Material Adverse Effect.
(q) Each of the Issuers owns or possesses all licenses or other
rights to use all material patents, trademarks, service marks, trade names,
copyrights and know-how necessary to conduct the businesses now or proposed
to be operated by it as described in the Final Memorandum, and none of the
Issuers has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted rights of
others with respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, if such assertion of infringement or conflict
were sustained, would have a Material Adverse Effect.
(r) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency is necessary or required for the performance by any of
the Issuers of their respective obligations hereunder, in connection with
the offering, issuance or sale of the Securities, the Exchange Notes or the
Private Exchange Notes (and the related guarantees thereof), for the
performance by any of the Issuers of their respective obligations under the
Operative Documents, or the consummation of the Transactions or any other
transactions contemplated hereby or thereby or for the due execution,
delivery or performance by the Issuers of the Operative Documents, except
such as may be required by the Securities Act, state securities or "Blue
Sky" laws in connection with the purchase and initial resale of the
Securities by the Placement Agents, other than as contemplated by the
Registration Rights Agreement.
(s) Each of the Issuers has obtained or has applied for all licenses,
franchises and other governmental authorizations necessary to conduct the
business now operated or proposed to be operated as described in the Final
Memorandum, the lack of which would result in a Material Adverse Effect.
(t) Each of the Issuers has good and marketable title to all real
property and good title to all personal property described in the Final
Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it (except for those
-8-
<PAGE>
leases of real property in which such Issuer has good title and that would
be marketable but for the requirement that the landlord consent to an
assignment or sublease of the lease), free and clear of all liens, charges,
encumbrances or restrictions, except, in each case to the extent the
failure to have such title or the existence of such liens, charges,
encumbrances or restrictions would not result in Material Adverse Effect.
(u) None of the Issuers has incurred any liability for any prohibited
transaction or funding deficiency or any complete or partial withdrawal
liability with respect to any pension, profit sharing or other plan which
is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which any Issuer makes or ever has made a
contribution and in which any employee of any Issuer is or has ever been a
participant, which, individually or in the aggregate, could reasonably be
expected to have or result in a Material Adverse Effect; and with respect
to such plans, each of the Issuers is in compliance in all respects with
all applicable provisions of ERISA, except where the failure to so comply
would not, singly or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(v) Each of the Issuers has filed all necessary federal, state, local
and foreign income and franchise tax returns that are required to be filed
or have duly requested extensions thereof, except where such failure would
not have a Material Adverse Effect, and have paid all taxes required to be
paid by any of them and any related assessments, fines or penalties, except
for any such tax, assessment, fine or penalty that is of a de minimus
amount or that is being contested in good faith and by appropriate
proceedings and for which adequate reserves have been made in accordance
with GAAP; and each of the Issuers believes charges, accruals and reserves
adequate in all material respects have been provided for in the financial
statements included in the Final Memorandum in respect of all federal,
state, local and foreign taxes for all periods as to which the tax
liability of any of the Issuers has not been finally determined or remains
open to examination by applicable taxing authorities.
(w) Each of the Issuers carry or are entitled to the benefits of
insurance, including self-insurance with financially sound and reputable
insurers other than with respect to self-insurance, in such amounts and
covering such risks as is generally maintained by companies of established
repute engaged in the same or similar business, and all such insurance is
in full force and effect.
(x) Each of the Issuers has reviewed its operations and that of its
respective subsidiaries to evaluate the extent to which the business or
operations of the Issuers or any of their subsidiaries will be affected by
the Year 2000 Problem (that is, any significant risk that computer hardware
or software applications used by the Issuers and their respective
subsidiaries will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates
or times periods occurring prior to January 1, 2000); as a result of such
review, the Issuers do
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not believe, that (A) there are any issues related to this preparedness to
address the Year 2000 Problem that are of a character required to be
described or referred to in the Final Memorandum which have not been
accurately described in the Final Memorandum and (B) except as discussed in
the Final Memorandum, the Year 2000 Problem will have a Material Adverse
Effect.
(y) The fair value and present fair saleable value of the assets of
each of the Issuers exceeds the sum of its stated liabilities and
identified contingent liabilities; and after giving effect to the
Transactions and the consummation of the transactions contemplated thereby
and by the Final Memorandum, none of the Issuers will be (a) left with
unreasonably small capital with which to carry on its business as it is
proposed to be conducted, (b) unable to pay its debts (contingent or
otherwise) as they mature or (c) insolvent.
(z) The statistical and market-related data included in the Final
Memorandum are based on or derived from independent sources which the
Issuers believe to be reliable in all material respects or represent the
Issuers' good faith estimates based on information they believe to be
reliable.
(aa) The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Final Memorandum will not be, an "investment company" or
an entity "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
(bb) Neither any of the Issuers nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "Affiliate") of any of
the Issuers has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security
(as defined in the Securities Act) which is or will be integrated with the
sale of the Securities in a manner that would require the registration
under the Securities Act of the Securities or (ii) engaged in any form of
general solicitation or general advertising in connection with the offering
of the Securities, (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(cc) None of the Issuers, their respective Affiliates or any person
acting on their behalf has engaged or will engage in any directed selling
efforts (within the meaning of Regulation S) with respect to the
Securities; and the Issuers and their respective Affiliates and any person
acting on their behalf have complied and will comply with the offering
restrictions requirement of Regulation S, except no representation,
warranty or agreement is made by the Issuers in this paragraph with respect
to the Placement Agents.
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(dd) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Placement Agents in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended.
(ee) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(ff) No securities of the Company or any subsidiary are of the same
class (within the meaning of Rule 144A under the Act) as the Securities and
listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(gg) Neither the consummation of the Transactions or any other
transactions contemplated hereby nor the sale, issuance, execution or
delivery of the Securities, nor the application of the proceeds therefrom
(applied as described in the Final Memorandum under the caption "Use of
Proceeds"), will violate Regulation T (12 C.F.R. Part 220), U (12 C.F.R.
Part 221) or X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(hh) Neither any of the Issuers nor any of their respective
Affiliates, officers, directors or controlling persons has taken, directly
or indirectly, any action designed to cause or to result in, or that has
constituted or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of any of the
Issuers to facilitate the sale or resale of the Securities.
(ii) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between any of the Issuers and any other
person that would give rise to a valid claim against the Issuers or the
Placement Agents for a brokerage commission, finder's fee or like payment
in connection with the issuance, purchase and sale of the Securities.
(jj) The audited and unaudited consolidated financial statements and
related notes of each of the Company and its consolidated subsidiaries and
Pacer and its consolidated subsidiaries included in the Final Memorandum
present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of the Company and its
consolidated subsidiaries and Pacer and its consolidated subsidiaries,
respectively, at the dates and for the periods to which they relate and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis. Arthur Andersen LLP, which has
audited the consolidated financial statements as set forth in its reports
included in the Final Memorandum, is an independent public accounting firm
as required by the Act and the rules and regulations promulgated
thereunder.
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(kk) The unaudited pro forma condensed consolidated balance sheet and
statements of operations (including the notes thereto) included in the
Final Memorandum (A) have been prepared in all material respects in
accordance with applicable requirements of Regulation S-X promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
(B) have been properly computed on the bases described therein. The
assumptions used in the preparation of the unaudited pro forma condensed
consolidated balance sheet and statements of income and other pro forma
condensed consolidated financial information included in the Final
Memorandum are reasonable and the adjustments used therein are appropriate
to give effect to the transactions or circumstances referred to therein.
(ll) Each of the Transactions conforms in all material respects to the
description thereof in the Final Memorandum.
(mm) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
business, condition (financial or other), or results of operations of the
Issuers and their respective subsidiaries, taken as a whole, from that set
forth in the Final Memorandum (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(nn) The Company has delivered to counsel for the Placement Agents a
true and correct copy of each of the documents contemplated by the
Transactions, together with all related agreements and all schedules and
exhibits thereto, and there shall have been no material amendments,
alterations, modifications or waivers of any of the provisions of any such
documents since their respective dates of execution, other than any such
amendments, alterations, modifications and waivers as to which the
Placement Agents have been advised in writing and which would be required
to be disclosed in the Final Memorandum; and to the best knowledge of the
Issuers there exists no event or condition which would constitute a default
or an event of default under any of the documents contemplated by the
Transactions which would result in a Material Adverse Effect or materially
adversely affect the ability of the Issuers to consummate the Transactions.
2. Agreements to Sell and Purchase. Coyote agrees to cause the
Issuers, and as of the Closing Date, the Issuers agree, to sell to the several
Placement Agents, and each Placement Agent, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Issuers the respective principal amount of Securities set forth in Schedule B
hereto opposite its name at a purchase price of 100% of the principal amount
thereof (the "Purchase Price") plus accrued interest, if any, to the Closing
Date.
Coyote hereby agrees not to permit the Company to, and as of the
Closing Date the Company agrees that, without the prior written consent of the
Placement Agents, it will
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not, during the period beginning on the date hereof and continuing to and
including the Closing Date, offer, sell, contract to sell or otherwise dispose
of any debt of the Company or warrants to purchase debt of the Company
substantially similar to the Securities (other than the sale of the Securities
under this Agreement).
3. Terms of Offering. The Placement Agents have advised Coyote and
the Issuers that they will make an offering of the Securities purchased by them
hereunder on the terms to be set forth in the Final Memorandum, as soon as
practicable after this Agreement is entered into as in the Placement Agents'
judgment is advisable.
4. Payment and Delivery. Payment for the Securities shall be made
to the Company in immediately available funds in New York City against delivery
of such Securities for the respective accounts of the several Placement Agents
at 10:00 a.m., New York City time, on May 28, 1999 or such other time as shall
be agreed upon by the Placement Agents and Coyote, such time and date
hereinafter referred to as the "Closing Date."
Certificates for the Securities shall be in definitive form or global
form, as specified by the Placement Agents, and registered in such names and in
such denominations as the Placement Agents shall request in writing not later
than one full business day prior to the Closing Date. The certificates
evidencing the Securities shall be delivered to the Placement Agents on the
Closing Date for the respective accounts of the several Placement Agents, with
any transfer taxes payable in connection with the transfer of the Securities to
the Placement Agents duly paid, against payment of the Purchase Price therefor
plus accrued interest, if any, to the date of payment and delivery.
5. Conditions to the Placement Agents' Obligations. The several
obligations of the Placement Agents to purchase and pay for the Securities on
the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading, in
the rating accorded any of the Company's securities by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition (financial or
otherwise), or in the earnings, business or operations of the Issuers,
taken as a whole, from that set forth in the Final Memorandum
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement) that, in the judgment of the Placement Agents,
is material and adverse and that makes it, in the
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<PAGE>
judgment of the Placement Agents, impracticable to market the
Securities on the terms and in the manner contemplated in the Final
Memorandum.
(b) The Placement Agents shall have received on the Closing Date a
certificate, dated the Closing Date and signed by at least two executive
officers of each of the Issuers, to the effect set forth in Section 5(a)(i)
and to the effect that the representations and warranties of the Issuers
contained in this Agreement are true and correct as of the Closing Date
(other than to the extent any such representation or warranty is expressly
made to a certain date) and that each of the Issuers has performed, in all
material respects, all covenants and agreements and satisfied, in all
material respects, all of the conditions on their part to be performed or
satisfied hereunder on or before the Closing Date.
The executive officers signing and delivering such certificate may
rely upon the best of their knowledge as to proceedings threatened.
(c) The Placement Agents shall have received on the Closing Date an
opinion of Dewey Ballantine LLP, special counsel for the Issuers, and other
special counsel to the Issuers, dated the Closing Date, substantially in
the form of Exhibit B hereto. Such opinion shall be rendered to the
Placement Agents and the Trustee at the request of the Issuers and shall so
state therein.
(d) The Placement Agents shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel, counsel for the Placement Agents, dated
the Closing Date, with respect to certain legal matters relating to this
Agreement and such other related matters as the Placement Agents may
require. In rendering such opinion, Cahill Gordon & Reindel shall have
received and may rely upon such certificates and other documents and
information as they may reasonably request to pass upon such matters. In
addition, in rendering their opinion, Cahill Gordon & Reindel may state
that their opinion is limited to matters of New York law, Delaware
corporations law and federal law.
(e) The Placement Agents shall have received on each of the date
hereof and the Closing Date letters, dated the date hereof or the Closing
Date, as the case may be, in form and substance reasonably satisfactory to
the Placement Agents, from Pricewaterhouse Coopers and Arthur Andersen,
LLP, independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Final
Memorandum.
(f) The representations and warranties of Coyote and the Issuers, as
the case may be, contained in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date
(other than to the extent any
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<PAGE>
such representation or warranty is expressly made as of a certain date);
the Issuers shall have complied in all material respects with all covenants
and agreements and satisfied all conditions on their part to be performed
or satisfied hereunder at or prior to the Closing Date; and subsequent to
the date of the most recent financial statements in the Final Memorandum,
there shall have been no material adverse change in the business, condition
(financial or other), results of operations or prospects of the Issuers,
taken as a whole, except as set forth in, or contemplated by, the Final
Memorandum.
(g) Subsequent to the date as of which information is given in the
Final Memorandum, except as described in the Final Memorandum, none of the
Issuers shall have incurred any liabilities or obligations, direct or
contingent (other than in the ordinary course of business) that are
material to the Issuers, taken as a whole, or entered into any transactions
not in the ordinary course of business that are material to the business,
condition (financial or other), results of operations or prospects of the
Issuers, taken as a whole, and, other than as described in the Final
Memorandum, there shall not have been any change in the capital stock
(other than changes in the ordinary course of business) or long-term
indebtedness of any Issuer that is material to the business, condition
(financial or other), results of operations or prospects of the Issuers,
taken as a whole.
(h) Subsequent to the date as of which information is given in the
Final Memorandum, the conduct of the business and operations of the Issuers
or any of their respective subsidiaries has not been interfered with by
strike, fire, flood, hurricane, accident or other calamity (whether or not
insured) or by any court or governmental action, order or decree, and,
except as otherwise stated therein, the properties of the Issuers or any of
their respective subsidiaries have not sustained any loss or damage
(whether or not insured) as a result of any such occurrence, except any
such interference, loss or damage which would not have a Material Adverse
Effect.
(i) On the Closing Date, the Placement Agents shall have received the
Registration Rights Agreement executed by each of the Issuers and such
agreement shall be in full force and effect on the Closing Date.
(j) The Recapitalization and the other Transactions shall have been
consummated concurrently with the offering of the Securities and the
Placement Agents shall have received a true and correct copy of the (i)
Stock Purchase Agreement, dated as of March 15, 1999 by and between APL
Limited and Coyote Acquisition LLC and (ii) the Agreement and Plan of
Merger dated as of February 22, 1999 by and among Mile High Acquisition
Corp., Pacer and the stockholders of Pacer.
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<PAGE>
(k) The Credit Agreement shall have been executed and delivered by
all parties thereto and the Placement Agents shall have received a true and
correct copy thereof.
(l) On the Closing Date, the Company shall have, to the extent a
party thereto, complied in all material respects with all agreements and
covenants in all documents contemplated by the Transactions and satisfied
or waived all conditions specified therein to be complied with or performed
at or prior to the Closing Date, and each of the documents contemplated by
the Transactions shall be in full force and effect.
(m) On the Closing Date, the Placement Agents shall have received the
Joinder Agreement executed by each of the Issuers and such agreement shall
be in full force and effect on the Closing Date.
(n) On or before the Closing Date, the Placement Agents and counsel
for the Placement Agents shall have received such further documents,
opinions, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Issuers as they
shall have heretofore reasonably requested from the Issuers and Coyote.
All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Placement Agents and counsel for the Placement Agents. The Company shall
furnish to the Placement Agents such conformed copies of such opinions,
certificates, letters, schedules, documents and instruments in such quantities
as the Placement Agents shall reasonably request.
6. Covenants of the Issuers. In further consideration of the
agreements of the Placement Agents contained in this Agreement, Coyote and, as
of the Closing Date, the Issuers covenant with each Placement Agent as follows:
(a) To furnish to the Placement Agents in New York City, without
charge, as soon as practicable after the date of this Agreement and during
the period mentioned in Section 6(c), as many copies of the Preliminary
Memorandum, the Final Memorandum, any documents incorporated by reference
therein and any supplements and amendments thereto as the Placement Agents
may reasonably request.
(b) Before amending or supplementing either Memorandum, to furnish to
the Placement Agents a copy of each such proposed amendment or supplement
and not to use any such proposed amendment or supplement to which the
Placement Agents reasonably object.
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<PAGE>
(c) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Placement
Agents, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Final Memorandum in order to make the
statements therein, in the light of the circumstances when the Final
Memorandum is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Placement Agents, it is necessary to amend or
supplement the Final Memorandum to comply with applicable law, forthwith to
prepare and furnish, at its own expense, to the Placement Agents, either
amendments or supplements to the Final Memorandum so that the statements in
the Final Memorandum as so amended or supplemented will not, in the light
of the circumstances when the Final Memorandum is delivered to a purchaser,
be misleading or so that the Final Memorandum, as amended or supplemented,
will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Placement
Agents may designate and will continue such qualifications in effect for as
long as may be reasonably necessary to complete the resale of the
Securities; provided, however, that in connection therewith, none of the
Issuers shall be required to qualify as a foreign corporation or to execute
a general consent to service of process in any jurisdiction or subject
itself to taxation in any such jurisdiction where it is not so subject.
(e) Whether or not the Transactions or the other transactions
contemplated in this Agreement are consummated or this Agreement is
terminated, to pay or cause to be paid all expenses incident to the
performance of its obligations under this Agreement, including: (i) the
fees, disbursements and expenses of the Issuers' counsel and the Issuers'
accountants in connection with the issuance and sale of the Securities and
all other fees or expenses in connection with the preparation of each
Memorandum and all amendments and supplements thereto, including all
printing costs associated therewith, and the delivering of copies thereof
to the Placement Agents, in the quantities herein above specified, (ii) all
costs and expenses related to the transfer and delivery of the Securities
to the Placement Agents, including any transfer or other taxes payable
thereon, (iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Securities under state securities laws and all expenses in connection with
the qualification of the Securities for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Placement
Agents in connection with such qualification and in connection with the
Blue Sky or legal investment memorandum, (iv) any fees charged by rating
agencies for the rating of the Securities, (v) all document production
charges and expenses of counsel to the Placement Agents (but not including
their fees for professional services) in connection with the preparation of
this Agreement, (vi) the fees and expenses, if any, incurred in connection
with the admission of the Securities for trading in PORTAL or any
appropriate market system, (vii) the costs and charges of the Trustee and
any transfer agent, regis-
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trar or depositary, (viii) the cost of the preparation, issuance and
delivery of the Securities, (ix) the costs and expenses of the Issuers
relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Securities, including,
without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Issuers, travel and lodging expenses of the representatives and officers of
the Issuers and any such consultants, and the cost of any aircraft
chartered in connection with the road show, and (x) all other costs and
expenses incident to the performance of the obligations of the Issuers
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 8,
and the last paragraph of Section 10, the Placement Agents will pay all of
their costs and expenses, including fees and disbursements of their
counsel, transfer taxes payable on resale of any of the Securities by them
and any advertising expenses connected with any offers they may make.
(f) Neither the Issuers nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) which could be integrated with the sale
of the Securities in a manner which would require the registration under
the Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell the Securities
by means of any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of
the Securities Act.
(h) While any of the Securities remain "restricted securities" within
the meaning of the Securities Act, to make available, upon request, to any
seller of such Securities the information specified in Rule 144A(d)(4)
under the Securities Act, unless the Company is then subject to Section 13
or 15(d) of the Exchange Act.
(i) To use their commercially reasonable efforts to permit the
Securities to be designated PORTAL securities in accordance with the rules
and regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market.
(j) None of the Issuers, their Affiliates or any person acting on
their behalf (other than the Placement Agents) will engage in any directed
selling efforts (as that term is defined in Regulation S) with respect to
the Securities, and the Issuers and their Affiliates and each person acting
on their behalf (other than the Placement Agents) will comply with the
offering restrictions requirement of Regulation S.
(k) During the period of two years after the Closing Date, the
Issuers will not, and will not permit any of their affiliates (as defined
in Rule 144 under the Secu-
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<PAGE>
rities Act) to resell any of the Securities which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them.
(l) The Company will apply the net proceeds from the sale of the
Securities substantially as set forth under "Use of Proceeds" in the Final
Memorandum.
(m) For so long as the Securities remain outstanding, the Issuers
will furnish to the Placement Agents copies of all reports and other
communications (financial or otherwise) furnished by the Issuers to the
Trustee or to the holders of the Securities and, as soon as available,
copies of any reports or financial statements furnished to or filed by the
Company with the Commission or any national securities exchange on which
any class of securities of the Company may be listed.
(n) Prior to the Closing Date, the Company will furnish to the
Placement Agents, as soon as practicable after they have been prepared, a
copy of any unaudited interim consolidated financial statements of the
Company for any period subsequent to the period covered by the most recent
financial statements appearing in the Final Memorandum.
7. Offering of Securities; Restrictions on Transfer. (a) Each
Placement Agent, severally and not jointly, represents and warrants that such
Placement Agent is a qualified institutional buyer as defined in Rule 144A under
the Securities Act (a "QIB"). Each Placement Agent, severally and not jointly,
agrees with the Issuers that (i) it has not and will not solicit offers for, or
offer or sell, such Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it has and will solicit offers for such
Securities only from, and will offer such Securities only to, persons that it
reasonably believes to be (A) in the case of offers inside the United States,
QIBs and (B) in the case of offers outside the United States, to persons other
than U.S. persons ("foreign purchasers," which term shall include dealers or
other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)); provided,
however, that, in the case of this clause (B), in purchasing such Securities
such persons are deemed to have represented and agreed as provided in the Final
Memorandum under the caption "Transfer Restrictions."
(b) Each Placement Agent, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) such Placement Agent understands that no action has been or will
be taken in any jurisdiction by the Issuers that would permit a public
offering of the Securities, or possession or distribution of either
Memorandum or any other offering or publicity material relating to the
Securities, in any country or jurisdiction where action for that purpose is
required;
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<PAGE>
(ii) such Placement Agent will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Securities or has in its possession or distributes either
Memorandum or any such other material, in all cases at its own expense;
(iii) the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Rule 144A
or Regulation S under the Securities Act or pursuant to another exemption
from the registration requirements of the Securities Act;
(iv) such Placement Agent has offered the Securities and will offer
and sell the Securities (A) as part of their distribution at any time and
(B) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 of
Regulation S or as otherwise permitted in Section 7(a); accordingly, no
Placement Agent, its Affiliates nor any persons acting on its or their
behalf have engaged or will engage in any directed selling efforts (within
the meaning of Regulation S) with respect to the Securities, and any such
Placement Agent, its Affiliates and any such persons have complied and will
comply with the offering restrictions requirement of Regulation S;
(v) such Placement Agent has (A) not offered or sold and, prior to
the date six months after the Closing Date, will not offer or sell any
Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (B) complied
and will comply with all applicable provisions of the Financial Services
Act 1986 with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and (C) only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person
who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is
a person to whom such document may otherwise lawfully be issued or passed
on;
(vi) such Placement Agent understands that the Securities have not
been and will not be registered under the Securities and Exchange Law of
Japan, and represents that it has not offered or sold, and agrees not to
offer or sell, directly or indirectly, any Securities in Japan or for the
account of any resident thereof except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law of Japan and
otherwise in compliance with applicable provisions of Japanese law; and
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<PAGE>
(vii) such Placement Agent agrees that, at or prior to confirmation
of sales of the Securities, it will have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after
the later of the commencement of the offering and the closing
date, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used
above have the meaning given to them by Regulation S."
Terms used in this Section 7(b) have the meanings given to them by
Regulation S.
8. Indemnity and Contribution. (a) Each of the Issuers and,
subject to the last sentence of the ninth introductory paragraph of this
Agreement, Coyote, jointly and severally, agrees to indemnify and hold harmless
each Placement Agent, its directors, officers and each person, if any, who
controls such Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Issuers shall have furnished any amendments or
supplements thereto to the Placement Agents), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission that is based upon information relating to any Placement Agent
furnished to the Issuers in writing by such Placement Agent expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
-------- -------
to any Preliminary Memorandum shall not inure to the benefit of any Placement
Agent from whom the person asserting any such losses, claims, damages or
liabilities purchased Securities, or any person controlling such Placement
Agent, if a copy of the Final Memorandum (as then amended or supplemented if the
Issuers shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Placement Agent to such person, if required by
law so to have been delivered, at or prior to the written confirmation of the
sale of the Securities to such person, and if the Final Memorandum (as so
amended or supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities, unless such failure is the result of
noncompliance by the Issuers with Section 6(a) hereof.
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<PAGE>
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless each of the Issuers and Coyote, its directors,
officers and each person, if any, who controls such Issuer or Coyote within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Issuers and Coyote to
such Placement Agent, but only with reference to information relating to such
Placement Agent furnished to the Issuers in writing by such Placement Agent
expressly for use in either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Placement Agents, in the case of parties
indemnified pursuant to Section 8(a), and by the Issuers and Coyote, in the case
of parties indemnified pursuant to Section 8(b). The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement (x) includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding and
(y) does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of such indemnified party.
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of
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<PAGE>
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Issuers and Coyote on the one hand and the
Placement Agents on the other hand from the offering of the Securities or (ii)
if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Issuers and Coyote on the one hand and of the Placement Agents on
the other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers and
Coyote on the one hand and the Placement Agents on the other hand in connection
with the offering of the Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Securities (before
deducting expenses) received by the Issuers and Coyote and the total discounts
and commissions received by the Placement Agents, in each case as set forth in
the Final Memorandum, bear to the aggregate offering price of the Securities.
The relative fault of the Issuers and Coyote on the one hand and of the
Placement Agents on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuers or Coyote, or by the Placement Agents and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Placement Agents'
respective obligations to contribute pursuant to this Section 8 are several in
proportion to the respective principal amount of Securities they have purchased
hereunder, and not joint.
(e) The Issuers, Coyote and the Placement Agents agree that it would
not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Placement Agents were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in Section 8(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 8(d) shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Placement Agent shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it in the initial placement of such Securities were offered to investors exceeds
the amount of any damages that such Placement Agent has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
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<PAGE>
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Issuers and Coyote, as the case may be, contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Placement Agent or
any person controlling any Placement Agent or by or on behalf of the Issuers,
their respective officers or directors or any person controlling any of the
Issuers and (iii) acceptance of and payment for any of the Securities.
9. Termination. This Agreement shall be subject to termination by
notice given by the Placement Agents to Coyote, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq
National Market, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or other
domestic or international calamity or any crisis or change in political or
economic conditions or in the financial markets or any calamity or crisis that,
in the judgment of the Placement Agents, is material and adverse and (b) in the
case of any of the events specified in clauses 9(a)(i) through 9(a)(iv), such
event, singly or together with any other such event, makes it, in the judgment
of the Placement Agents, impracticable or inadvisable to market the Securities
on the terms and in the manner contemplated in the Final Memorandum.
Termination of this Agreement pursuant to this Section 9 shall be without
liability of any party to any other party except as provided in Section 6(e) and
8(f).
10. Effectiveness; Defaulting Placement Agents. (a) This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
(b) If, on the Closing Date, any one or more of the Placement Agents
shall fail or refuse to purchase Securities that it or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Placement Agent or Placement Agents agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, the other Placement
Agents shall be obligated, severally in the proportions that the principal
amount of Securities set forth opposite their respective names in Schedule B
bears to the aggregate principal amount of Securities set forth opposite the
names of all such non-defaulting Placement Agents, or in such other proportions
as you may specify, to purchase the Securities which such defaulting Placement
Agent or Placement Agents agreed but failed or refused to purchase on such date;
provided that in no event shall the principal amount of Securities that any
Placement Agent has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10(b) by an amount in excess of one-ninth of such
principal amount of Securities
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<PAGE>
without the written consent of such Placement Agent. If, on the Closing Date,
any Placement Agent or Placement Agents shall fail or refuse to purchase
Securities which it or they have agreed to purchase hereunder on such date and
the aggregate principal amount of Securities with respect to which such default
occurs is more than one-tenth of the aggregate principal amount of Securities to
be purchased on such date, and arrangements satisfactory to the Placement Agents
and the Issuers for the purchase of such Securities are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Placement Agent or of the Issuers. In any such case,
either the Placement Agents or the Issuers shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Final Memorandum or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Placement Agent from liability in respect of any default
of such Placement Agent under this Agreement.
If this Agreement shall be terminated by the Placement Agents, or any
of them, because of any failure or refusal on the part of any of the Issuers to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any of the Issuers shall be unable to perform their respective
obligations under this Agreement, the Issuers will reimburse the Placement
Agents or such Placement Agents as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of Cahill Gordon & Reindel, counsel for the Placement
Agents) reasonably incurred by such Placement Agents in connection with this
Agreement or the offering contemplated hereunder.
11. Notices. All communications hereunder shall be in writing and,
if sent to the Issuers, shall be mailed or delivered (a) to the Company at:
Pacer International, Inc.
3746 Mt. Diablo Blvd.
Suite 110
Lafayette, CA 94549
Telecopy: (925) 299-1939
Attention: Donald C. Orris
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Telecopy: (212) 259-6333
Attention: Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
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<PAGE>
or (b) to the Placement Agents at:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Telecopy: (212) 761-4000
Attention: Joel Feldmann
BT Alex. Brown Incorporated
130 Liberty Street
New York, New York 10006
Telecopy: (212) 250-7200
Attention: Larry Zimmerman
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010-3629
Telecopy: (212) 325-8018
Attention: Mark W. Kennelley
Credit Lyonnais Securities (USA) Inc.
1301 Avenue of the Americas
New York, New York 10019-6022
Telecopy: (212) 261-4190
Attention: Michael E. Sohr
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: John A. Tripodoro, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by addressee, if telecopied.
12. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
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<PAGE>
13. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any provisions thereof relating to conflicts of law.
14. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
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<PAGE>
Very truly yours,
COYOTE ACQUISITION LLC
By: /s/ Joshua Harris
__________________________
Joshua Harris
Vice President
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<PAGE>
Accepted as of the date hereof:
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Clifton E. Strain
____________________________
Name: Clifton E. Strain
Title: Principal
BT ALEX. BROWN INCORPORATED
By: /s/ Bruce Tully
____________________________
Name: Bruce Tully
Title: Managing Director
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Harold W. Bogle
____________________________
Name: Harold W. Bogle
Title: Managing Director
CREDIT LYONNAIS SECURITIES (USA) INC.
By: /s/ David C. Travis
____________________________
Name: David C. Travis
Title: Managing Director
-29-
<PAGE>
SCHEDULE A
GUARANTORS
Name State of Incorporation
- ---- ----------------------
Pacer Logistics, Inc. Delaware
Cross Con Transport, Inc. Illinois
Cross Con Terminals, Inc. Delaware
Pacer International Rail Services LLC Colorado
Pacer International Consulting LLC Colorado
Pacer Rail Services LLC Colorado
Pacific Motor Transport Company California
Pacer Express, Inc. California
Pacer Integrated Logistics, Inc. Delaware
PLM Acquisition Corporation Delaware
Manufacturers Consolidation Service, Inc. Tennessee
Levcon, Inc. Tennessee
Manufacturers Consolidation Service of Canada, Inc. Delaware
Interstate Consolidation Service, Inc. California
Interstate Consolidation, Inc. California
Intermodal Container Service, Inc. California
Keystone Terminals Acquisition Corp. Delaware
<PAGE>
SCHEDULE B
Principal Amount of
Placement Agents Securities to be Purchased
---------------- --------------------------
Morgan Stanley & Co. Incorporated................ $ 57,000,000
BT Alex. Brown Incorporated...................... $ 57,000,000
Credit Suisse First Boston Corporation........... $ 28,500,000
Credit Lyonnais Securities (USA) Inc............ 7,500,000
Total.................................. $ 150,000,000
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT B
OPINION OF COUNSEL FOR THE ISSUERS AND COYOTE
The opinion of the counsel for the Issuers and Coyote, to be delivered
pursuant to Section 5(c) of the Purchase Agreement shall be to the effect that:
A. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own or lease its
property and to conduct its business as described in the Final Memorandum and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
B. Each Guarantor and its material subsidiaries has been duly
organized, is validly existing as a corporation or limited liability company in
good standing under the laws of the jurisdiction of its organization, has the
requisite power and authority to own its property and to conduct its business as
described in the Final Memorandum, if at all, and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not result in a Material Adverse Effect.
C. The Purchase Agreement has been duly authorized, executed and
delivered by Coyote and each of the Issuers.
D. The Notes, the Exchange Notes and the Private Exchange Notes have
been duly authorized by the Company and, when executed and authenticated in
accordance with the provisions of the Indenture and, in the case of the Notes,
delivered to and paid for by the Placement Agents in accordance with the terms
of the Purchase Agreement, will be valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law) and (iii) public
policy considerations, and will be entitled to the benefits of the Indenture and
the Registration Rights Agreement. No holder of securities of any of the
Issuers will be entitled to have such securities registered under the
registration statements required to be filed by any of the Issuers pursuant to
the Registration Rights Agreement, other than as expressly permitted thereby.
<PAGE>
E. The Guarantees have been duly authorized, executed and delivered
by each of the Guarantors, and, upon the execution, authentication and delivery
of the Notes and payment therefor in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture and will constitute
a valid and legally binding obligation of each of the Guarantors, enforceable
against each of the Guarantors in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditor's rights generally, (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is considered in
a proceeding in equity or at law) and (iii) public policy considerations.
F. Each of the Indenture and the Registration Rights Agreement has
been duly authorized, executed and delivered by each of the Issuers, and are
valid and legally binding obligations of each of the Issuers, enforceable
against each of the Issuers in accordance with its respective terms, (A) subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law) and (iii) public
policy considerations and (B) except as rights to indemnification and
contribution under the Registration Rights Agreement may be limited by federal
and state securities laws and public policy considerations.
G. The execution and delivery by each of the Issuers of, and the
performance by each of the Issuers of the Transactions and its respective
obligations under the Operative Documents will not contravene any provision of
applicable law or the certificate of incorporation, by-laws or other
organizational documents of any of the Issuers or, any of the Agreements or
Instruments, known to us, binding upon any of the Issuers that is material to
any of the Issuers or, to our knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over any of the Issuers,
and no consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by any of the
Issuers of the Transactions or their respective obligations under any of the
Operative Documents, which, if contravened, individually or in the aggregate,
would have a Material Adverse Effect, and except such as may be required by the
Securities Act, state securities or "Blue Sky" laws in connection with the
purchase and initial resale of the Securities by the Placement Agents, other
than as contemplated by the Registration Rights Agreement.
H. Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under the
Purchase Agreement and the other Operative Documents and to consummate the
Transactions and any other transactions contemplated thereby, including, without
limitation, the power and authority to issue, sell and deliver the Securities as
contemplated by the Purchase Agreement.
<PAGE>
I. As of the Closing Date, the Company will have the authorized,
issued and outstanding capital stock as set forth under the caption
"Capitalization" in the Final Memorandum. All of the shares of issued and
outstanding capital stock of each of the Issuers have been duly authorized and
validly issued and are fully paid and non-assessable; none of the outstanding
shares of capital stock of any of the Issuers was issued in violation of any
preemptive or, to the best of our knowledge, other similar rights of any
securityholder of any such Issuer; and except as disclosed in the Final
Memorandum, all of the outstanding shares of capital stock of each of the
Issuers are owned free and clear of all liens, encumbrances, equities and claims
or restrictions on transferability or voting (other than those imposed by the
Securities Act, the securities or "Blue Sky" laws of certain jurisdictions and
the Shareholders Agreement dated as of the Closing Date, among (i) APL Limited,
Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company, (ii) certain
management shareholders, Coyote Acquisition LLC, Coyote Acquisition II LLC and
the Company and (iii) certain affiliates of certain of the Placements Agents,
Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company.
J. To our best knowledge, except as described in the Final
Memorandum, there is not pending or, to the knowledge of any Issuer, threatened,
any action, suit, proceeding, inquiry or investigation to which any Issuer is a
party, or to which the property of any Issuer is subject, before or brought by
any court or governmental agency or body, which could reasonably be expected to
have a Material Adverse Effect.
K. Each of the Transactions conforms in all material respects to the
descriptions thereof in the Final Memorandum.
L. Each of the Operative Documents conforms in all material respects
to the respective statements relating thereto contained in the Final Memorandum;
the statements in the Final Memorandum under the caption "Certain United States
Federal Income Tax Considerations," insofar as such statements constitute a
summary of the United States federal tax laws referred to therein, are accurate
and fairly summarize in all material respects the United States federal tax laws
referred to therein.
M. To our best knowledge, none of the Issuers is in violation of its
charter, by-laws or other organizational document or in violation of any
applicable law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over any of the Issuers or any of their respective properties or
assets or in default in the performance or observance of any Agreements and
Instruments except for such violations and defaults that would not result in a
Material Adverse Effect.
N. No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency is necessary or required for the performance by any of the
Issuers of their respective obligations under
<PAGE>
the Purchase Agreement, in connection with the offering, issuance or sale of the
Securities, the Exchange Notes or the Private Exchange Notes (and the related
guarantees thereof), for the performance by any of the Issuers of their
respective obligations under the Operative Documents, or the consummation of the
Transactions or any other transactions contemplated thereby or for the due
execution, delivery or performance by the Issuers of the Operative Documents,
except such as may be required by the Securities Act, state securities or "Blue
Sky" laws in connection with the purchase and initial resale of the Securities
by the Placement Agents, other than as contemplated by the Registration Rights
Agreement.
O. The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as described
in the Final Memorandum will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
P. It is not necessary in connection with the offer, sale and
delivery of the Securities to the Placement Agents in the manner contemplated by
the Purchase Agreement to register the Securities under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended.
Q. The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
R. Neither the consummation of the Transactions or any other
transactions contemplated by the Purchase Agreement nor the sale, issuance,
execution or delivery of the Securities, nor the application of the proceeds
therefrom (applied as described in the Final Memorandum under the caption "Use
of Proceeds"), will violate Regulation T (12 C.F.R. Part 220), U (12 C.F.R. Part
221) or X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve
System.
In addition, we have participated in conferences with directors and
other representatives of the Issuers, representatives of the independent
certified public accountants for the Issuers, and your representatives, at which
the contents of the Final Memorandum and related matters were discussed and,
although we are not passing upon, and do not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the Final
Memorandum and have not made any independent check or verification thereof
(other than as expressly described in paragraphs K and L above), during the
course of such participation (relying as to materiality to the extent we have
deemed appropriate upon the statements of officers and other representatives of
the Issuers), no facts came to our attention that caused us to believe that the
Final Memorandum, as of its date or as the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; it being understood that we express no
belief with respect to the finan-
<PAGE>
cial statements, including the notes thereto, pro forma financial statements and
other financial and statistical data included in the Final Memorandum.
<PAGE>
EXHIBIT C
FORM OF JOINDER AGREEMENT
Reference is hereby made to the Purchase Agreement, dated May 24, 1999 (the
"Agreement"), between Coyote Acquisition LLC ("Coyote") and the Placement Agents
named therein. Unless otherwise defined herein, terms defined in the Agreement
and used herein shall have the meanings given them in the Agreement.
Each of the undersigned parties hereby unconditionally and irrevocably expressly
assumes, confirms and agrees to perform and observe as an Issuer each and any of
the covenants, agreements, terms, conditions, obligations, appointments, duties,
promises and liabilities of an Issuer under the Agreement as if it were an
original signatory thereto.
Each of the undersigned hereby agrees to promptly execute and deliver any and
all further documents and take such further action as any other undersigned
party or the Placement Agents may reasonably require to effect the purpose of
this Joinder Agreement.
This Joinder Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflict of law principles
thereof.
B-1
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Joinder Agreement this
28th day of May 1999.
PACER INTERNATIONAL, INC.
PACER LOGISTICS, INC.
CROSS CON TRANSPORT, INC.
CROSS CON TERMINALS, INC.
PACIFIC MOTOR TRANSPORT COMPANY
PACER EXPRESS, INC.
PACER INTEGRATED LOGISTICS, INC.
PLM ACQUISITION CORPORATION
INTERSTATE CONSOLIDATION SERVICE, INC.
INTERSTATE CONSOLIDATION, INC.
MANUFACTURERS CONSOLIDATION SERVICE, INC.
INTERMODAL CONTAINER SERVICE, INC.
LEVCON, INC.
MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC.
KEYSTONE TERMINALS ACQUISITION CORP.
By: _____________________________________
Name:
Title:
<PAGE>
PACER INTERNATIONAL RAIL SERVICES LLC
PACER INTERNATIONAL CONSULTING LLC
PACER RAIL SERVICES LLC
By: PACER LOGISTICS, INC.,
as Manager
By: _____________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.18
REGISTRATION RIGHTS AGREEMENT
Dated as of May 28, 1999
by and among
PACER INTERNATIONAL, INC.,
and
MORGAN STANLEY & CO. INCORPORATED,
BT ALEX. BROWN INCORPORATED,
CREDIT SUISSE FIRST BOSTON CORPORATION
and
CREDIT LYONNAIS SECURITIES (USA) INC.
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
---------
entered into as of May 28, 1999, by and among PACER INTERNATIONAL, INC., a
Tennessee corporation (the "Company"), the companies named on Schedule A hereto
-------
and any company which later becomes a party hereto in accordance with this
Agreement, as guarantors (collectively, the "Guarantors" and together with the
----------
Company, the "Issuers"), and MORGAN STANLEY & CO. INCORPORATED, BT ALEX. BROWN
-------
INCORPORATED, CREDIT SUISSE FIRST BOSTON CORPORATION and CREDIT LYONNAIS
SECURITIES (USA) INC. (collectively, the "Placement Agents").
----------------
This Agreement is made pursuant to the Purchase Agreement dated May
24, 1999, by and among the Company, the Guarantors and the Placement Agents (the
"Purchase Agreement"), which provides for the sale by the Company to the
------------------
Placement Agents of an aggregate of $150,000,000 principal amount of the
Company's 11 3/4% Senior Subordinated Notes Due 2007 (the "Notes") and the
-----
guarantees thereof by the Guarantors (the "Guarantees" and together with the
----------
Notes, the "Securities"). The Securities are being issued pursuant to an
----------
indenture, dated as of the date hereof (the "Indenture"), among the Company, the
---------
Guarantors and Wilmington Trust Company, as trustee (the "Trustee").
-------
In order to induce the Placement Agents to enter into the Purchase
Agreement, the Issuers have agreed to provide to the Placement Agents and their
direct and indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.
1. The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
-----------
shall have the following meanings:
Additional Interest: See Section 4 hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
affiliate: An "affiliate" as such term is defined in Rule 405.
---------
Agreement: See the introductory paragraphs hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
Business Day: Any day that is not a Saturday, Sunday or a day on
------------
which banking institutions in New York are authorized or required by law to be
closed.
Company: See the introductory paragraphs hereto.
-------
<PAGE>
Effectiveness Date: The 180th day after the Issue Date; provided,
------------------ --------
however, that with respect to any Shelf Registration, the Effectiveness Date
- -------
shall be the 60th day after the Filing Date with respect thereto.
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Offer Registration Statement: See Section 2(a) hereof.
-------------------------------------
Filing Date: (A) With respect to an Exchange Offer Registration
-----------
Statement, the earlier of the date of the filing thereof with the SEC and the
120th day after the Issue Date, and (B) in each other case (which may be
applicable notwithstanding the consummation of the Exchange Offer), the 60th day
after the delivery (or, if earlier, the date of required delivery) of a Shelf
Notice pursuant to Section 2(c) hereof.
Guarantees: See the introductory paragraphs hereto.
----------
Guarantors: See the introductory paragraphs hereto.
----------
Holder: Any holder of a Security.
------
indemnified parties: See Section 7(c) hereof.
-------------------
indemnifying parties: See Section 7(c) hereof.
--------------------
Indenture: See the introductory paragraphs hereto.
---------
Information: See Section 5(n) hereof.
-----------
Initial Shelf Registration: See Section 3(a) hereof.
--------------------------
Inspectors: See Section 5(n) hereof.
----------
Issue Date: May 28, 1999, the date of original issuance of the Notes.
----------
-2-
<PAGE>
NASD: See Section 5(s) hereof.
----
Notes: See introductory paragraphs hereto.
-----
Offering Memorandum: The final offering memorandum of the Company
-------------------
dated May 24, 1999, in respect of the offering of the Securities.
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, limited
------
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Placement Agents: See the introductory paragraphs hereto.
----------------
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
------------------
Records: See Section 5(n) hereof.
-------
Registrable Notes: Each Note upon its original issuance and at all
-----------------
times subsequent thereto, each Exchange Note (and the related Guarantees) as to
which Section 2(c)(iv) hereof is applicable upon original issuance and at all
times subsequent thereto and each Private Exchange Note (and the related
Guarantees) upon original issuance thereof and at all times subsequent thereto,
until the earliest to occur of (i) a Registration Statement (other than, with
respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable,
the Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note
(unless such Note was not tendered for exchange by the Holder thereof), Exchange
Note or such Private Exchange Note (and the related Guarantees), as the case may
be, has been disposed of in accordance with
-3-
<PAGE>
such effective Registration Statement, (ii) such Note has been exchanged
pursuant to the Exchange Offer for an Exchange Note or Exchange Notes (and the
related Guarantees) that may be resold without restriction under state and
federal securities laws, (iii) such Note, Exchange Note or Private Exchange Note
(and the related Guarantees), as the case may be, ceases to be outstanding for
purposes of the Indenture, or (iv) such Note, Exchange Note or Private Exchange
Note (and the related Guarantees), as the case may be, in the reasonable opinion
of the Company, may be resold without restriction pursuant to Rule 144(k) under
the Securities Act.
Registration Default: See Section 4(c).
--------------------
Registration Statement: Any registration statement of the Company
----------------------
that covers any of the Notes, the Exchange Notes or the Private Exchange Notes
(and the related Guarantees) filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act.
--------
Rule 144A: Rule 144A under the Securities Act.
---------
Rule 405: Rule 405 under the Securities Act.
--------
Rule 415: Rule 415 under the Securities Act.
--------
Rule 424: Rule 424 under the Securities Act.
--------
SEC: The Securities and Exchange Commission.
---
Securities: See the introductory paragraphs hereto. "Securities"
----------
shall include all Notes, Exchange Notes and Private Exchange Notes.
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration: See Section 3(a) hereof.
------------------
Subsequent Shelf Registration: See Section 3(b) hereof.
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
-4-
<PAGE>
Trustee: The trustee under the Indenture and the trustee (if any)
-------
under any indenture governing the Exchange Notes and Private Exchange Notes (and
the related Guarantees).
underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
Except as otherwise specifically provided, all references in this
Agreement to acts, laws, statutes, rules, regulations, releases, forms, no-
action letters and other regulatory requirements (collectively, "Regulatory
----------
Requirements") shall be deemed to refer also to any amendments thereto and all
- ------------
subsequent Regulatory Requirements adopted as a replacement thereto having
substantially the same effect therewith.
2. Exchange Offer
--------------
(a) The Issuers shall file with the SEC, no later than the Filing
Date, a Registration Statement (the "Exchange Offer Registration Statement") on
-------------------------------------
an appropriate registration form with respect to a registered offer (the
"Exchange Offer") to exchange any and all of the Registrable Notes for a like
- ---------------
aggregate principal amount of notes (the "Exchange Notes") of the Company,
--------------
guaranteed by the Guarantors on substantially the same terms as the Guarantees,
that are identical in all material respects to the Securities, except that such
notes shall contain no restrictive legend thereon, and which are entitled to the
benefits of the Indenture or a trust indenture which is identical in all
material respects to the Indenture (other than such changes to the Indenture or
any such identical trust indenture as are necessary to comply with the TIA) and
which, in either case, has been qualified under the TIA. The Exchange Offer
shall comply with all applicable tender offer rules and regulations under the
Exchange Act and other applicable law. The Issuers shall use their commercially
reasonable efforts to (x) cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness Date,
(y) keep the Exchange Offer open for not less than 20 Business Days (or longer
if required by applicable law) after the date that notice of the Exchange Offer
is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the
35th day following the date on which the Exchange Offer Registration Statement
is declared effective by the SEC. If, after the Exchange Offer Registration
Statement is initially declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, the Exchange Offer Registration Statement shall be deemed not
to have become effective for purposes of this Agreement, unless such
interference is cured within five Business Days.
-5-
<PAGE>
Each Holder (including, without limitation, each Participating Broker-
Dealer (as defined)) who participates in the Exchange Offer will be required to
represent to the Company, in writing (which may be contained in the applicable
letter of transmittal) that: (i) any Exchange Notes acquired in exchange for
Registrable Notes tendered are being acquired in the ordinary course of business
of the Person receiving such Exchange Notes, whether or not such recipient is a
Holder of Registrable Notes, (ii) at the time of the commencement of the
Exchange Offer, neither such Holder nor, to the actual knowledge of such Holder,
any other Person receiving Exchange Notes from such Holder has an arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, (iii) the Holder is
not an affiliate of any Issuer, (iv) if such Holder is not a Participating
Broker-Dealer, that it has not engaged in, and does not intend to engage in, the
distribution of Exchange Notes, and (v) if such Holder is a Participating
Broker-Dealer, such Holder acquired the Registrable Notes as a result of market-
making activities or other trading activities and that it will comply with the
applicable provisions of the Securities Act with respect to resale of any
Exchange Notes.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Registrable Notes that are Private Exchange
- --------
Notes, Exchange Notes as to which Section 2(c)(iv) hereof is applicable and
Exchange Notes held by Participating Broker-Dealers, and the Company shall have
no further obligation to register Registrable Notes (other than Private Exchange
Notes and Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to
Section 3 hereof.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Placement Agents, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
"beneficial owner" (as defined in Rule l3d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
-------------
Broker-Dealer"). Such "Plan of Distribution" section shall also expressly
- -------------
permit, to the extent permitted by applicable policies and regulations of the
SEC, the use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including, to the extent permitted by
applicable policies and regulations of the SEC, all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes in compliance with the Securities
Act.
In accordance with Section 5 hereof, the Issuers shall use their
commercially reasonable efforts to keep the Exchange Offer Registration
Statement effective and to amend and supplement the Prospectus contained therein
in order to permit such Prospectus to be law-
-6-
<PAGE>
fully delivered by all Persons subject to the prospectus delivery requirements
of the Securities Act during the period required by the Securities Act for use
in connection with any resale of Exchange Notes; provided that such period shall
--------
not exceed 180 days after consummation of the Exchange Offer (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof) (the
"Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, any Placement Agent
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Company, upon the request of any such Holder, shall simultaneously
with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver
to any such Holder, in exchange (the "Private Exchange") for such Notes held by
----------------
any such Holder, a like principal amount of notes (the "Private Exchange Notes")
----------------------
of the Company, guaranteed by the Guarantors on substantially similar terms as
the Guarantees, that are identical in all material respects to the Exchange
Notes except for the placement of a restrictive legend on such Private Exchange
Notes. The Private Exchange Notes shall be issued pursuant to the same
indenture as the Exchange Notes and bear the same CUSIP number as the Exchange
Notes. All of the Securities shall vote and consent together on all matters as
one class, and none of the Notes, the Exchange Notes or the Private Exchange
Notes will have the right to vote or consent as a separate class on any matter.
In connection with the Exchange Offer, the Company shall:
(1) mail, or cause to be mailed, to each Holder of record entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Registrable Notes at any time
prior to the close of business, New York time, on the last Business Day on
which the Exchange Offer remains open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Company shall:
-7-
<PAGE>
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Registrable Notes tendered for exchange, Exchange Notes or
Private Exchange Notes, as the case may be, equal in principal amount to
the Registrable Notes of such Holder so accepted for exchange; provided,
--------
that in the case of any Registrable Notes held in global form by a
depositary, authentication and delivery to such depositary of one or more
Exchange Notes in global form in an equivalent principal amount thereto for
the account of such Holders in accordance with the Indenture (or the
indenture described in Section 2(a) hereof) shall satisfy such
authentication and delivery requirement.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency with
respect to the Exchange Offer or the Private Exchange, and no material adverse
development shall have occurred with respect to the Company, (iii) all
governmental approvals shall have been obtained, which approvals the Company
deems necessary for the consummation of the Exchange Offer or Private Exchange,
(iv) the conditions precedent to the Company's obligations under this Agreement
shall have been fulfilled and (v) such other conditions as shall be agreed upon
by the Company and the Placement Agents.
(c) If (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated on or prior to
the 210th day after the Issue Date, (iii) any holder of Private Exchange Notes
so requests in writing to the Company, on or prior to the 60th day after the
consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of any of the Issuers or as an "underwriter" within the meaning of
the Securities Act) and such Holder so requests by written notice to the Company
on or prior to the 60th day after the consummation of the Exchange Offer, then
in the case of each of clauses (i) to and including (iv) of this sentence, the
Issuers shall promptly (and in any event within 20 days after the occurrence of
any of the events described in such clauses (i) to and including (iv)) deliver
to the Holders and the Trustee written
-8-
<PAGE>
notice thereof (the "Shelf Notice") and the Issuers shall file a Shelf
------------
Registration pursuant to Section 3 hereof.
3. Shelf Registration
------------------
If at any time a Shelf Notice is delivered or required to be delivered
as contemplated by Section 2(c) hereof, then:
(a) Initial Shelf Registration. The Issuers shall file with the SEC a
--------------------------
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Issuers shall use their
--------------------------
commercially reasonable efforts to file with the SEC the Initial Shelf
Registration on or before the applicable Filing Date. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Company shall not permit any securities other than
the Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration.
In accordance with Section 5 hereof, the Issuers shall use their
commercially reasonable efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act on or prior to the applicable
Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
later of the Issue Date and the date which is two years after the date on which
any affiliate of the Company ceased to hold Registrable Notes (the
"Effectiveness Period") or such shorter period ending on the earliest to occur
- ---------------------
of (i) all Registrable Notes covered by the Initial Shelf Registration being
sold in the manner set forth and as contemplated in the Initial Shelf
Registration, (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes covered by and not sold under the Initial Shelf Registration
or an earlier Subsequent Shelf Registration being declared effective under the
Securities Act, or (iii) the date on which, in the written opinion of counsel to
the Company, all outstanding Registrable Notes held by Persons that are not
affiliates of the Company may be resold without registration under the
Securities Act pursuant to Rule 144(k) under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
------------------------------
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the sale of all
of the Registrable Notes registered thereunder), the Issuers shall use their
commercially reasonable efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45
-9-
<PAGE>
days of such cessation of effectiveness amend the Initial Shelf Registration in
a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Notes covered by and not sold under the
Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed,
-----------------------------
the Issuers shall use their commercially reasonable efforts to cause the
Subsequent Shelf Registration to be declared effective under the Securities Act
as soon as practicable after such filing and to keep such subsequent Shelf
Registration continuously effective for a period equal to the number of days in
the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
------------------
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
(d) Provision by Holders of Certain Information in Connection with
--------------------------------------------------------------
the Shelf Registration. No Holder of Registrable Notes may include any of its
- ----------------------
Registrable Notes in any Shelf Registration unless and until such Holder
furnishes to the Company, in writing within 30 days after receipt of a request
therefor, the information specified in Items 507 and 508 (as applicable) of
Regulation S-K under the Securities Act and any other applicable rules,
regulations or policies of the SEC for use in connection with any Shelf
Registration or Prospectus included therein, on a form to be provided by the
Company. No Holder of Registrable Notes shall be entitled to Additional Interest
pursuant to Section 4 hereof unless and until such Holder shall have provided
all such information. Each selling Holder agrees to furnish promptly to the
Company additional information to be disclosed so that the information
previously furnished to the Company by such Holder does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
4. Additional Interest
-------------------
(a) The Issuers and the Placement Agents agree that the Holders will
suffer damages if the Issuers fail to fulfill their obligations under Section 2
or Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Issuers, jointly and severally,
agree to pay, as liquidated damages and as the sole
-10-
<PAGE>
and exclusive remedy of the Holders should the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof, additional interest on the
Securities ("Additional Interest ") under the circumstances and to the extent
-------------------
set forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration has been filed
on or prior to the 120th day after the Issue Date or (B)
notwithstanding that the Issuers have consummated or will
consummate the Exchange Offer, the Issuers are required to
file a Shelf Registration and such Shelf Registration is not
filed on or prior to the Filing Date applicable thereto,
then, commencing on the day after any such Filing Date,
Additional Interest shall accrue on the principal amount of
the Securities at a rate of 0.25% per annum for the first 90
days immediately following each such Filing Date, and such
Additional Interest rate shall increase by an additional
0.25% per annum at the beginning of each subsequent 90-day
period, or
(ii) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration is declared
effective by the SEC on or prior to the 180th day after the
Issue Date or (B) notwithstanding that the Issuers have
consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such
Shelf Registration is not declared effective by the SEC on
or prior to the Effectiveness Date in respect of such Shelf
Registration, then, commencing on the day after such
Effectiveness Date, Additional Interest shall accrue on the
principal amount of the Securities at a rate of 0.25% per
annum for the first 90 days immediately following the day
after such Effectiveness Date, and such Additional Interest
rate shall increase by an additional 0.25% per annum at the
beginning of each subsequent 90-day period, or
(iii) if (A) the Company has not exchanged Exchange
Notes for all Securities validly tendered in accordance with
the terms of the Exchange Offer on or prior to the 210th day
after the Issue Date or (B) if applicable, a Shelf
Registration has been declared effective and such Shelf
Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue
on the principal amount of the Securities at a rate of 0.25%
per annum for the first 90 days commencing on (x) the 211th
day after the Issue Date with respect to Notes validly
tendered and not exchanged by the Company, in the case of
(A) above, or (y) the day such Shelf Registration ceases to
be effective in the case of (B) above, and such Additional
Inter-
-11-
<PAGE>
est rate shall increase by an additional 0.25% per annum at
the beginning of each such subsequent 90-day period (it
being understood and agreed that, notwithstanding any
provision to the contrary, so long as any Note that is the
subject of a Shelf Notice is then covered by an effective
Shelf Registration, no Additional Interest shall accrue on
such Note);
provided, however, that the Additional Interest rate on the Securities may not
- -------- -------
exceed at any one time in the aggregate 1.00% per annum; provided, further,
-------- -------
however, that in no event shall the Company be obligated to pay Additional
- -------
Interest under more than one of the clauses in this Section 4(a) at any one
time; provided, further, however, that (1) upon the filing of the applicable
-------- ------- -------
Exchange Offer Registration Statement or the applicable Shelf Registration as
required hereunder (in the case of clause (i) above of this Section 4(a)), (2)
upon the effectiveness of the Exchange Offer Registration Statement or the
applicable Shelf Registration as required hereunder (in the case of clause (ii)
of this Section 4(a)), or (3) upon the exchange of the applicable Exchange Notes
for all Securities validly tendered (in the case of clause (iii)(A) of this
Section 4(a)), or upon the effectiveness of the applicable Shelf Registration
which had ceased to remain effective (in the case of clause (iii)(B) of this
Section 4(a)), Additional Interest on the Securities in respect of which such
events relate as a result of such clause (or the relevant subclause thereof), as
the case may be, shall cease to accrue.
(b) Notification of Trustee. The Company shall notify the Trustee
-----------------------
within three Business Days after each and every date on which an event occurs in
respect of which Additional Interest is required to be paid (an "Event Date").
----------
Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii)
of this Section 4 will be payable in cash on the dates, and to the Persons, to
whom interest on the Securities is payable. The amount of Additional Interest
will be determined by multiplying the applicable Additional Interest rate by the
principal amount of the outstanding Securities, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
(c) Suspension of Additional Interest for Good Cause. Additional
------------------------------------------------
Interest shall not accrue with respect to an event listed in Sections
4(a)(i)(B), (ii)(B) and (iii)(B) hereof (each, a "Registration Default") if (i)
--------------------
such Registration Default under Section 4(a)(iii)(B) hereof occurs because of
the filing of a post-effective amendment to such Registration Statement to
incorporate annual audited financial information with respect to the Company
where such post-effective amendment is not yet effective and needs to be
declared effective to permit Holders to use the related Prospectus, (ii) such
Registration Default occurs because of the occurrence of other material events
or developments with respect to the Com-
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<PAGE>
pany that would need to be described in such Registration Statement or the
related Prospectus, and the effectiveness of such Registration Statement is
reasonably required to be suspended while such Registration Statement and
related Prospectus are amended or supplemented to reflect such events or
developments, (iii) such Registration Default results from the suspension of the
effectiveness of such Registration Statement because of the existence of
material events or developments with respect to the Company or any of its
affiliates, the disclosure of which the Company determines in good faith would
have a material adverse effect on the business, operations or prospects of the
Company, or (iv) such Registration Default results from the suspension of the
effectiveness of such Registration Statement because the Company does not wish
to disclose publicly a pending material business transaction that has not yet
been publicly disclosed; provided, however, that if any such Registration
-------- -------
Default exists and continues on more than an aggregate of 60 days in any
calendar year, Additional Interest shall accrue and be payable in accordance
with Sections 4(a) and 4(b) hereof from the 61st day on which any such
Registration Default exists, and they shall continue to accrue until the date on
which such Registration Default is cured.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of the Securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Issuers hereunder, the Issuers
shall:
(a) Prepare and file with the SEC on or prior to the applicable
Filing Date, a Registration Statement or Registration Statements as
required by Section 2 or 3 hereof, and use their commercially reasonable
efforts to cause each such Registration Statement to become effective and
remain effective as provided herein; provided, however, that, if
------ --------
(1) such filing is pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period relating
thereto and from whom the Company has received written notice that it
will be a Participating Broker-Dealer in the Exchange Offer,
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<PAGE>
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders of
the Registrable Notes included in such Registration Statement (with respect
to a Registration Statement filed pursuant to Section 3 hereof) or each
such Participating Broker-Dealer (with respect to any such Registration
Statement), as the case may be, their counsel and the managing underwriter
or underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each
case at least five days prior to such filing, or such later date as is
reasonable under the circumstances). The Issuers shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the
Registrable Notes included in such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriter or underwriters, if any, shall reasonably object on a
timely basis, except for any Registration Statement or amendment thereto or
related Prospectus or supplement thereto (a copy of which has been
previously furnished as provided in the preceding sentence) which counsel
to the Company has advised the Company in writing is required to be filed
in order to comply with applicable law.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Shelf
Registration or Exchange Offer Registration Statement continuously
effective for the Effectiveness Period or the Applicable Period,
respectively, and in any case, except for such periods as to which
Additional Interest does not accrue pursuant to Section 4(c) hereof, cause
the related Prospectus to be supplemented by any Prospectus supplement
required by applicable law, and as so supplemented to be filed pursuant to
Rule 424; and comply with the provisions of the Securities Act and the
Exchange Act applicable to each of them with respect to the disposition of
all Securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuers shall be deemed not to have
used their commercially reasonable efforts to keep a Registration Statement
effective during the Effectiveness Period or the Applicable Period, as the
case may be, relating thereto if any Issuer knowingly takes any action that
would result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able
to sell such Registrable Notes or such Exchange Notes during that period
unless such action is required by applicable law or permitted by this
Agreement.
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<PAGE>
(c) If
(1) a Shelf Registration is filed pursuant to Section 3 hereof,
or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period relating
thereto from whom the Company has received written notice that it will
be a Participating Broker-Dealer in the Exchange Offer,
notify the selling Holders of Registrable Notes (with respect to a Shelf
Registration filed pursuant to Section 3 hereof), or each such
Participating Broker-Dealer (with respect to any such Registration
Statement), as the case may be, their counsel and the managing underwriter
or underwriters, if any, promptly (but in any event within one business
day), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed and, with
respect to a Registration Statement or any post-effective amendment, when
the same has become effective under the Securities Act (including in such
notice a written statement that any Holder may, upon request, obtain, at
the sole expense of the Company, one conformed copy of such Registration
Statement or post-effective amendment including financial statements and
schedules thereto, documents incorporated or deemed to be incorporated
therein by reference and exhibits thereto), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of any Prospectus or
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Notes or resales of Exchange Notes by Participating Broker-Dealers the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 5(m) hereof
cease to be true and correct in all material respects, (iv) of the receipt
by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement
or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that in the case
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<PAGE>
of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi) of
the Company's determination that a post-effective amendment to a
Registration Statement would be necessary or appropriate except, in the
case of clauses (iii), (iv), (v) and (vi), with respect to any event,
development or transaction permitted to be kept confidential without the
accrual of Additional Interest under Section 4(c)(iii) hereof, the Company
shall not be required to describe such event, development or transaction in
the written notice provided.
(d) If
(1) a Shelf Registration is filed pursuant to Section 3 hereof,
or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, use
their commercially reasonable efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any
such order is issued, to use their commercially reasonable efforts to
obtain the withdrawal of any such order at the earliest practicable
moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested during the Effectiveness Period by the managing underwriter or
underwriters (if any), the Holders of a majority in aggregate principal
amount of the Registrable Notes being sold in connection with an
underwritten offering or any Participating Broker-Dealer, (i) as promptly
as practicable incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters (if
any), such Holders, any Participating Broker-Dealer or counsel for any of
them reasonably request to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as
soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment.
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<PAGE>
(f) If
(1) a Shelf Registration is filed pursuant to Section 3 hereof,
or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period,
furnish to each selling Holder of Registrable Notes (with respect to a
Shelf Registration filed pursuant to Section 3 hereof) and to each such
Participating Broker-Dealer who so requests (with respect to any such
Registration Statement) and to their respective counsel and each managing
underwriter (if any) at the sole expense of the Company, one conformed copy
of the Registration Statement or Registration Statements and each post-
effective amendment thereto, including financial statements and schedules
thereto, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits thereto.
(g) If
(1) a Shelf Registration is filed pursuant to Section 3 hereof,
or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period,
deliver to each selling Holder of Registrable Notes (with respect to a
Shelf Registration filed pursuant to Section 3 hereof), or each such
Participating Broker-Dealer (with respect to any such Registration
Statement), as the case may be, their respective counsel, and the managing
underwriter or underwriters, if any, at the sole expense of the Company, as
many copies of the Prospectus or Prospectuses (including each form of
preliminary Prospectus) and each amendment or supplement thereto and any
documents incorporated therein by reference as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuers
hereby consent to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by, or the sale by
Participating
-17-
<PAGE>
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by
any Participating Broker-Dealer who seeks to sell Securities during the
Applicable Period, use their commercially reasonable efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters (if any) and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker-Dealer or the managing
underwriter or underwriters (if any) reasonably request in writing;
provided, however, that where Securities held by Participating Broker-
-------- -------
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform Blue Sky
investigations, and the Issuers agree to file registrations and
qualifications required to be filed pursuant to this Section 5(h), keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Securities
held by Participating Broker-Dealers or the Registrable Notes covered by
the applicable Registration Statement; provided, further, that none of the
-------- -------
Issuers shall be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that
would subject it to general service of process in any such jurisdiction
where it is not then so subject, or (C) subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters (if any) to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations (subject to applicable
requirements contained in the Indenture or the indenture under which the
Registrable Notes were issued) and registered in such names as the managing
underwriter or underwriters (if any) or Holders may request.
(j) Subject to the last proviso in (h) above, use their commercially
reasonable efforts to cause the Registrable Notes covered by the
Registration Statement to be
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<PAGE>
registered with or approved by such other governmental agencies or
authorities as may be reasonably necessary to enable the seller or sellers
thereof or the underwriter or underwriters, if any, to consummate the
disposition of such Registrable Notes, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which
case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals.
(k) If
(1) a Shelf Registration is filed pursuant to Section 3 hereof,
or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period,
upon the occurrence of any event contemplated by paragraph 5(c)(v) or
5(c)(vi) hereof (except with respect to any event, development or
transaction permitted to be kept confidential without the accrual of
Additional Interest under Section 4(c)(iii) hereof for the period during
which such Additional Interest does not accrue), as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder (with respect to
a Shelf Registration filed pursuant to Section 3 hereof) or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer (with respect to any such Registration
Statement), any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company shall not be required to amend or supplement a
Registration Statement, any related Prospectus or any document incorporated
or deemed to be incorporated therein by reference in the event that, and
for a period not to exceed an aggregate of 60 days in any calendar year if
(i) an event occurs and is continuing as a result of which the Shelf
Registration, any related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading (with respect to such a Prospectus only, in the light of the
circumstances
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<PAGE>
under which they were made), and (ii) (a) the Company determines in its
good faith judgment that the disclosure of such event at such time would
have a material adverse effect on the business, operations or prospects of
the Company, or (b) the disclosure otherwise relates to a pending material
business transaction that has not yet been publicly disclosed.
(l) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the Trustee with certificates for
the Exchange Notes and the Private Exchange Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Exchange Notes and the Private Exchange Notes.
(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Securities in form and substance reasonably satisfactory to the Company,
and take all such other actions as are reasonably requested by the managing
underwriter or underwriters (if any) in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Company and the
subsidiaries of the Company (including any acquired business, properties or
entity, if applicable), and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated therein by
reference, in each case, as are customarily made by issuers to underwriters
in underwritten offerings of debt securities similar to the Securities, and
confirm the same in writing if and when requested in form and substance
reasonably satisfactory to the underwriters; (ii) obtain the written
opinions of counsel to the Company and written updates thereof in form,
scope and substance reasonably satisfactory to the underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
reasonably requested in underwritten offerings and such other matters as
may be reasonably requested by the managing underwriter or underwriters;
(iii) obtain "cold comfort" letters and updates thereof in form, scope and
substance reasonably satisfactory to the underwriters from the independent
public accountants of the Company (and, if necessary, any other independent
public accountants of the Company, any subsidiary of the Company or of any
business acquired by the Company, for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Securities and
such other matters as reasonably requested by the underwriters as permitted
by the Statement on Auditing Standards
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<PAGE>
No. 72; and (iv) if an underwriting agreement is entered into, include in
such underwriting agreement indemnification provisions and procedures no
less favorable to the sellers and underwriters, if any, than those set
forth in Section 7 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the
underwriters (if any). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If
(1) a Shelf Registration is filed pursuant to Section 3 hereof,
or
(2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period,
make available for inspection by any selling Holder of such Registrable
Notes being sold (with respect to a Shelf Registration filed pursuant to
Section 3 hereof), or each such Participating Broker-Dealer, as the case
may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating Broker-
Dealer (with respect to any such Registration Statement), as the case may
be, or underwriter (collectively, the "Inspectors"), upon written request,
----------
at the offices where normally kept, during reasonable business hours, all
pertinent financial and other records, pertinent corporate documents and
pertinent instruments of the Company and subsidiaries of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable
-------
them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and any of its
subsidiaries to supply all information ("Information") reasonably requested
-----------
by any such Inspector in connection with such due diligence
responsibilities. Each Inspector shall agree in writing that it will keep
the Records and Information confidential and that it will not disclose any
of the Records that the Company determines, in good faith, to be
confidential and notifies the Inspectors in writing are confidential unless
(i) the disclosure of such Records or Information is necessary to avoid or
correct a material misstatement or material omission in such Registration
Statement or Prospectus, (ii) the release of such Records or Information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or (iii) the information in such Records or Information has
been made generally available to the public other than by an Inspector or
an affiliate of an Inspector; provided, however that prior notice shall be
--------
provided as soon as practicable to
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<PAGE>
the Company of the potential disclosure of any information by such
Inspector pursuant to clause (i) or (ii) of this sentence in order to
permit the Company to obtain a protective order (or waive the provisions of
this paragraph (n)).
(o) Provide a trustee for the Exchange Notes and the Private Exchange
Notes, as the case may be, and cause the Indenture or the trust indenture
provided for in Section 2(a) hereof, as the case may be, to be qualified
under the TIA not later than the effective date of the first Registration
Statement relating to the Exchange Notes; and in connection therewith,
cooperate with the trustee under any such indenture and the Holders of the
Securities, to effect such changes (if any) to such indenture as may be
required for such indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use their commercially reasonable efforts to
cause such trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed with
the SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders with regard to any
applicable Registration Statement, a consolidated earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any fiscal quarter (or 90 days after
the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company,
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion or opinions of counsel to the Issuers, in a form
customary for underwritten transactions, addressed to the Trustee for the
benefit of all Holders of Securities participating in the Exchange Offer or
the Private Exchange, as the case may be, that the Exchange Notes or
Private Exchange Notes, as the case may be, the related Guarantees and the
relevant indenture constitute legal, valid and binding obligations of the
Company and/or the Guarantors, as applicable, enforceable against each of
them in accordance with their respective terms, subject to customary
exceptions and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other
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<PAGE>
Person as directed by the Company), in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes
are being canceled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(s) Reasonably cooperate with each seller of Registrable Notes covered
by any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective counsel
in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
----
(t) Use their commercially reasonable efforts to take all other steps
reasonably necessary to effect the registration of the Exchange Notes
and/or Registrable Notes covered by a Registration Statement contemplated
hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the securities covered thereby and that
such holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not required by the Securities Act or any
similar federal statute then in force, the deletion of the reference to such
Holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Notes agrees by its acquisition of such
Registrable Notes, and each Participating Broker-Dealer agrees by its
acquisition of Registrable Notes or
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<PAGE>
Exchange Notes to be sold by such Participating Broker-Dealer that, upon actual
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, such Holder
or Participating Broker-Dealer will forthwith discontinue disposition of the
Securities covered by such Registration Statement or Prospectus until such
Holder or Participating Broker-Dealer receives copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
------
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. In the event that the Company shall give any such notice,
the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Company, whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) reasonable fees and expenses of compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Securities and determination of the eligibility of the Securities for investment
under the laws of such jurisdictions within the United States (x) where the
Holders are located, in the case of the Exchange Notes, or (y) as provided in
Section 5(h) hereof, in the case of Securities to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including
without limitation, expenses of printing certificates for Securities in a form
eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
underwriter or underwriters (if any), or is reasonably requested by the Holders
of a majority in aggregate principal amount of the Registrable Notes included in
any Registration Statement or by any Participating Broker-Dealer in respect of
Securities to be sold during the Applicable Period, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and, in case of a Shelf Registration, reasonable fees
and disbursements of one special counsel for all of the sellers of Registrable
Notes (exclusive of any counsel retained pursuant to Section 7 hereof), subject
to Section 6(b) hereof, (v) fees and disbursements of all independent certified
public accountants referred to
-24-
<PAGE>
in Section 5(m)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company desires
such insurance, (vii) fees and expenses of all other Persons retained by the
Company, including, without limitation, the Trustee, (viii) internal expenses of
the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(ix) the expense of any annual audit, (x) any fees and expenses incurred in
connection with the listing of the Securities to be registered on any securities
exchange, and the obtaining of a rating of the Securities, in each case, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements. The Holders shall be responsible for
all of their other out-of-pocket expenses incurred in connection with the
registration of the Registrable Notes. The Issuers shall have no obligation to
pay any underwriting fees, discounts or commissions attributable to the sale of
any Registrable Notes.
(b) In connection with any Shelf Registration hereunder, the Company
shall reimburse the Holders of the Registrable Notes being registered in such
registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement. The Holders shall be responsible for all of
their other out-of-pocket expenses incurred in connection with their
registration of the Registrable Notes. The Issuers shall have no obligation to
pay any underwriting fees, discounts or commissions attributable to the sale of
any Registrable Notes.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder
participating in a registration hereunder and each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period, and each Person, if any,
who controls any such Holder or Participating Broker-Dealer within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or
is under common control with, or is controlled by, any such Holder or
Participating Broker-Dealer, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any such Holder or Participating Broker-Dealer or any
such controlling or affiliated Person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto), including all documents incorporated
therein by reference, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or caused by any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supple-
-25-
<PAGE>
ments thereto to such Holder or Participating Broker-Dealer), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
-------- -------
that the Company will not be so liable (i) insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Holder furnished to the Company in writing by or on behalf of any selling Holder
expressly for use therein or (ii) insofar as such losses, claims, damages or
liabilities were caused by an untrue statement or omission that was contained or
made in any preliminary Prospectus and corrected in the Prospectus or any
amendment or supplement thereto if (x) the Prospectus does not contain any other
untrue statement or omission of a material fact that was the subject matter of
the related proceeding, (y) any such losses, claims, damages or liabilities
resulted from an action, claim or suit by any Person who purchased Registrable
Notes or Exchange Notes which are the subject thereof from the indemnified party
(as defined) and (z) it is established in the related proceeding that such
indemnified party failed to deliver or provide a copy of the Prospectus (as so
amended or supplemented, if applicable) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes to such
Person if required by applicable law, unless such failure to deliver or provide
a copy of such Prospectus (as so amended or supplemented, if applicable) was a
result of non-compliance by the Company with Section 5 hereof. In connection
with any underwritten offering, the Company will also indemnify the
underwriters, if any, selling brokers, dealers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act) to the same extent
as provided above with respect to the indemnification of the Holders and the
Participating Broker-Dealers, if requested in connection with any Registration
Statement.
(b) Each Holder participating in a registration hereunder and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
agrees, severally and not jointly, to indemnify and hold harmless the Company
and the other Holders and Participating Broker-Dealers, and each of their
respective directors, officers who sign the Registration Statement and each
Person, if any, who controls the Company and any other Holder or Participating
Broker-Dealer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to the Holders and the Participating Broker-Dealers, but only
with reference to information relating to such Holder furnished to the Company
in writing by or on behalf of such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
-26-
<PAGE>
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any Person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the
"indemnified party") shall promptly notify the Person against whom such
-----------------
indemnity may be sought (the "indemnifying party") in writing and the
------------------
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel
and the indemnifying party has agreed to pay the fees and expenses of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (a) the fees and
expenses of more than one separate firm engaged in accordance with clause (ii)
of the preceding sentence (in addition to any local counsel) for all indemnified
parties, and that all such fees and expenses shall be reimbursed as they are
incurred upon written request and presentation of invoices. In any case
involving the Placement Agents and Persons who control the Placement Agents,
such firm shall be designated in writing by the Placement Agents. In any other
case involving the Holders and such Persons who control Holders, such firm shall
be designated in writing by a majority of affected Holders (measured in terms of
the principal amount of outstanding Securities). In all other cases, such firm
shall be designated by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but,
if settled with such consent or if there be a final non-appealable judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and expenses of
counsel in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been
-27-
<PAGE>
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 7 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 7(d) are several
in proportion to the respective principal amount of Registrable Notes of such
Holder that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 7 were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Notes were
sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 7
shall remain operative and in full force and effect regardless of (i) any
termination of this Agree-
-28-
<PAGE>
ment, (ii) any investigation made by or on behalf of any Participating Broker-
Dealer, any Holder or any Person controlling any Participating Broker-Dealer or
any Holder, or by or on behalf of the Company, its officers or directors or any
Person controlling the Company, (iii) acceptance of any of the Exchange Notes
and (iv) any sale of Registrable Notes pursuant to a Shelf Registration.
8. Rules 144 and 144A
------------------
Each of the Issuers covenants and agrees that it will file the reports
required to be filed by it under the Exchange Act and the rules and regulations
adopted by the SEC thereunder in a timely manner in accordance with the
requirements of the Exchange Act and, if at any time the Issuers are not
required to file such reports, the Issuers will, upon the request of any Holder
or beneficial owner of Registrable Notes, make available such information
necessary to permit sales pursuant to Rule 144A. Each of the Issuers further
covenants and agrees for so long as any Registrable Notes remain outstanding
that it will take such further action as any Holder of Registrable Notes may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Notes without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144(k) under the
Securities Act and Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and will be reasonably acceptable to the Issuers
and such Holders shall be responsible for all underwriting discounts and
commissions in connection therewith.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. None of the Issuers has, as of the
--------------------------
date hereof, and none of the Issuers shall, after the date of this Agreement,
enter into any agree-
-29-
<PAGE>
ment with respect to any of its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
any of the Issuers' other issued and outstanding securities under any such
agreements. None of the Issuers will enter into any agreement with respect to
any of its securities which will grant to any Person piggyback registration
rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Notes. None of the Issuers
---------------------------------------
shall, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Company, and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers;
provided, however, that Section 7 and this Section 10(c) may not
- -------- -------
be amended, modified or supplemented without the prior written consent of each
Holder, each Placement Agent, and each Participating Broker-Dealer (including
any person who was a Holder or Participating Broker-Dealer of Registrable Notes
or Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including, without
-------
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
(i) if to a Holder or any Participating Broker-Dealer, at the most
current address of such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar under the Indenture;
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<PAGE>
(ii) if to the Company, at the following address:
Pacer International, Inc.
3746 Mt. Diablo Blvd.
Suite 110
Lafayette, CA 94549
Attention: Donald C. Orris
Telecopy: (925) 299-1939
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New, York 10019
Attention: Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Telecopy: (212) 862-1093
(iii) If to a Placement Agent, at the following address:
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Attention: Joel Feldmann
Telecopy: (212) 761-0358
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John A. Tripodoro, Esq.
Telecopy: (212) 269-5420
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; one Business Day after
being timely delivered to a next-day air courier, and when receipt is
acknowledged by the addressee, if sent by facsimile.
-31-
<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in the Indenture.
(e) Successor and Assigns. This Agreement shall inure to the benefit
---------------------
of and be binding upon the successors and assigns of each of the parties hereto,
the Holders and the Participating Broker-Dealers.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Securities Held by the Company or Its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates
shall not be counted in determining whether such consented approval was given by
the Holders of such required percentage.
-32-
<PAGE>
(k) Third-Party Benificiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the one hand
and the Company on the other, or between or among any agents, representatives,
parents, subsidiaries, affiliates, predecessors in interest or successors in
interest with respect to the subject matter hereof and thereof are merged herein
and replaced hereby.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Company
PACER INTERNATIONAL, INC.
By: /s/ Donald C. Orris
_____________________________________
Name: Donald C. Orris
Title: Chairman, President and Chief
Executive Officer
Guarantors
PACER LOGISTICS, INC.
CROSS CON TRANSPORT, INC.
CROSS CON TERMINALS, INC.
PACIFIC MOTOR TRANSPORT COMPANY
PACER EXPRESS, INC.
PACER INTEGRATED LOGISTICS, INC.
PLM ACQUISITION CORPORATION
INTERSTATE CONSOLIDATION SERVICE, INC.
INTERSTATE CONSOLIDATION, INC.
MANUFACTURERS CONSOLIDATION
SERVICE, INC.
INTERMODAL CONTAINER SERVICE, INC.
LEVCON, INC.
MANUFACTURERS CONSOLIDATION SERVICE
OF CANADA, INC.
KEYSTONE TERMINALS ACQUISITION CORP.
By: /s/ Lawrence C. Yarberry
_____________________________________
Name: Lawrence C. Yarberry
Title: Executive Vice President
-34-
<PAGE>
PACER INTERNATIONAL RAIL SERVICES LLC
PACER INTERNATIONAL CONSULTING LLC
PACER RAIL SERVICES LLC
By: PACER LOGISTICS, INC.,
as Manager
By: /s/ Lawrence C. Yarberry
_____________________________________
Name: Lawrence C. Yarberry
Title: Executive Vice President
-35-
<PAGE>
Confirmed and accepted as of
the date first above written
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Clifton E. Strain
________________________
Name: Clifton E. Strain
Title: Principal
BT ALEX. BROWN INCORPORATED
By: /s/ Bruce Tully
________________________
Name: Bruce Tully
Title: Managing Director
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Jeffrey C. Home
________________________
Name: Jeffrey C. Home
Title: Director
CREDIT LYONNAIS SECURITIES (USA) INC.
By: /s/ David C. Travis
________________________
Name: David C. Travis
Title: Managing Director
-36-
<PAGE>
Schedule A
----------
Guarantors
- ----------
PACER LOGISTICS, INC.
CROSS CON TRANSPORT, INC.
CROSS CON TERMINALS, INC.
PACER INTERNATIONAL RAIL SERVICES LLC
PACER INTERNATIONAL CONSULTING LLC
PACER RAIL SERVICES LLC
PACIFIC MOTOR TRANSPORT COMPANY
PACER EXPRESS, INC.
PACER INTEGRATED LOGISTICS, INC.
PLM ACQUISITION CORPORATION
INTERSTATE CONSOLIDATION SERVICE, INC.
INTERSTATE CONSOLIDATION, INC.
MANUFACTURERS CONSOLIDATION SERVICE, INC.
INTERMODAL CONTAINER SERVICE, INC.
LEVCON, INC.
MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC.
KEYSTONE TERMINALS ACQUISITION CORP.
-37-
<PAGE>
EXHIBIT 5.1
[Letterhead of Dewey Ballantine LLP]
August 11, 1999
Pacer International, Inc.
1340 Treat Boulevard
Suite 200
Walnut Creek, CA 94596
Re: 11 3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange
Notes")
Ladies and Gentlemen:
We have acted as counsel for Pacer International, Inc., a Tennessee
corporation (the "Company"), in connection with the Company's offer to exchange
(the "Exchange Offer") up to $150,000,000 aggregate principal amount of
Exchange Notes which have been registered under the Securities Act of 1933, as
amended (the "Securities Act") for its existing 11 3/4% Senior Subordinated
Notes due 2007 (the "Old Notes"), as described in the Prospectus (the
"Prospectus") contained in the Registration Statement on Form S-4 (the
"Registration Statement"), to be filed with the Securities and Exchange
Commission. The Old Notes were issued, and the Exchange Notes are proposed to
be issued, under an indenture dated as of May 28, 1999 (the "Indenture"),
between the Company and Wilmington Trust Company, as Trustee. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Registration Statement.
In arriving at the opinion expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Indenture and
Exchange Notes, which are filed as exhibits to the Registration Statement, and
originals or copies, certified or otherwise identified to our satisfaction, of
such other documents, records, certificates, agreements and other matters as we
have deemed necessary for the purposes of this opinion.
In such examination, we have assumed, without independent investigation, (i)
the genuineness of all signatures; (ii) the legal capacity of all individuals
who have executed any of the documents reviewed by us; (iii) the authenticity
of all documents submitted to us as originals; (iv) the conformity to executed
documents of all unexecuted copies submitted to us; and (v) the authenticity
of, and the conformity to, original documents of all documents submitted to us
as certified or photocopied copies. As to certain factual matters material to
our opinion, we have relied upon oral statements, written information and
certificates of officials and representatives of the Company and others, and we
have not independently verified the accuracy of the statements contained
therein.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications set forth herein, we are of the opinion that the Exchange Notes
to be offered and issued by the Company have been duly authorized and, when
executed and authenticated in accordance with the terms of the Indenture
pursuant to which they will be issued and delivered in exchange for the
applicable Old Notes in accordance with the Exchange Offer, will be validly
issued and constitute binding obligations of the Company, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally or by general equitable
principles.
In rendering the foregoing opinion, our examination of matters of law has
been limited to the laws of the State of New York, the laws of the State of
Delaware and the federal laws of the United States of America, as in effect on
the date hereof.
<PAGE>
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference made to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we are included within the category of persons whose consent is
required under Section 7 of the Securities Act, or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by or furnished to any other person without our prior written consent.
Very truly yours,
/s/ Dewey Ballantine LLP
-------------------------------------
Dewey Ballantine LLP
2
<PAGE>
EXHIBIT 10.1
PACIFIC MOTOR TRANSPORT COMPANY
3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
March 31, 1997
Mr. Don C. Orris
10007 Oak Tree Court
Littleton, Colorado 80124
Employment Agreement
--------------------
Dear Don:
This letter sets forth the terms of your continued employment with
Pacific Motor Transport Company (the "Company").
1. Duties. On the terms and subject to the conditions contained
------
in this Agreement, you will be employed as the President of the Company (the
"Company"), and shall perform such duties and services consistent with such
position as may reasonably be assigned to you from time to time by the Board of
Directors.
2. Term. Unless sooner terminated in accordance with the
----
applicable provisions of this Agreement, your employment hereunder shall be for
the period (including any extensions thereof, the "Employment Period")
commencing on the date hereof (the "Commencement Date") and initially ending on
the second anniversary of the date hereof. Subject to the applicable provisions
of Section 8 of this Agreement regarding earlier termination, the Employment
Period shall be extended automatically one day prior to each anniversary of the
Commencement Date, beginning with the second anniversary thereof, for an
additional period of one year.
3. Time to be Devoted to Employment. During the Employment Period,
--------------------------------
you will devote your working energies, efforts, interest, abilities and time
exclusively to the business and affairs of the Company. You will not engage in
any other business or activity which, in the reasonable judgment of the Board of
Directors of the Company, would conflict or interfere with the performance of
your duties as
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 2
set forth herein, whether or not such activity is pursued for gain, profit or
other pecuniary advantage.
4. Base Salary; Bonus; Benefits.
----------------------------
(a) During the Employment Period, the Company (or any of
its affiliates) shall pay you a minimum annual base salary (the "Base Salary")
of $165,000, payable in such installments (but not less often than monthly) as
is generally the policy of the Company with respect to the payment of regular
compensation to its executive officers. On the first anniversary of the
Commencement Date, the Base Salary will be increased to $225,000 per annum, and
on the second anniversary of the Commencement Date, the Base Salary will be
adjusted to an amount that reflects customary market compensation for a company
in the same industry and of comparable size and income as the Company, which
Base Salary, as adjusted, shall be agreed upon by you and the Board of Directors
of the Company. At all times after the second anniversary of the Commencement
Date, increases in the Base Salary, if any, will be determined by the Board of
Directors in its sole discretion. During the Employment Period, you will also be
entitled to four weeks vacation per year and such other benefits as may be made
available to other executive officers of the Company generally, including,
without limitation, (i) participation in such health, life and disability
insurance programs and retirement or savings plans as the Company may from time
to time maintain in effect and (ii) the use of a vehicle provided by the Company
or an equivalent monthly car allowance in accordance with the Company's policy
with respect to its senior executives.
(b) In addition to the Base Salary and benefits set forth
in paragraph (a) above, you will be entitled to receive a cash incentive bonus,
if any, with respect to each fiscal year of the Company occurring during the
Employment Period, as provided in this paragraph. The bonus, if any, for each
fiscal year of the Company ending on or prior to December 31, 2001, shall be
calculated in the manner set forth on Annex A attached to this Agreement and
-------
shall be due and payable as soon as practicable, but in no event later than 30
days, following the Company's receipt from its public accountants of the audited
financial statements of the Company. If your employment with the Company is
terminated for any reason other than without "cause" pursuant to Section 8(b),
the Company will not pay you a bonus with respect to the fiscal year in which
your employment is terminated or thereafter. If your employment with the Company
is terminated without "cause" as
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 3
provided in Section 8(b) below, you will be entitled to receive that portion of
the bonus payable for such fiscal year pro rated through the date of such
termination based on the number of days elapsed through the termination date
over 365 days, payable in accordance with the second sentence of this Section
4(b). For each fiscal year ending after December 31, 2001, the amount of the
bonus and the criteria therefor shall be determined by the Board of Directors.
In the event that the Company consummates any mergers or acquisitions (whether
of assets, stock or other interests) or other extraordinary transactions, the
Board of Directors shall in good faith make such adjustments to the targets set
forth on Annex A for Operating Income (as defined on Annex A) to take into
------- -------
account the effects of any such acquisition or transaction.
5. Reimbursement of Expenses. During the Employment Period, the
-------------------------
Company shall reimburse you in accordance with Company policy for all reasonable
and necessary traveling expenses and other disbursements incurred by you for or
on behalf of the Company in connection with the performance of your duties
hereunder upon presentation of appropriate receipts or other documentation
therefor, in accordance with all applicable policies of the Company.
6. Options. The Company will grant you options (the "Options") to
-------
purchase shares of common stock, $.01 par value (the "Common Stock"), of the
Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan").
The Options will be evidenced by a Stock Option Agreement between you and the
Company. The Option Plan and the Stock Option Agreement will contain all of the
terms and conditions of your Options.
7. Disability or Death. If, during the Employment Period, you are
-------------------
incapacitated or disabled by accident, sickness or otherwise (hereinafter, a
"Disability") so as to render you mentally or physically incapable of performing
the services required to be performed by you under this Agreement for an
aggregate of 210 days in any period of 360 consecutive days, the Company may, at
any time thereafter, at its option, terminate your employment under this
Agreement immediately upon giving you written notice to that effect. In the
event of your death, your employment will be deemed terminated as of the date of
death.
8. Termination.
-----------
(a) The Company may terminate your employment hereunder at
any time for "cause" by giving you written notice
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 4
of such termination, with reasonable specificity of the grounds therefor. For
purposes of this Section 8, "cause" shall mean (i) willful misconduct with
respect to the business and affairs of the Company, PMT Holdings, Inc. ("PMT")
or any of their respective subsidiaries, (ii) willful neglect of your duties or
the failure to follow the lawful directions of the Board or more senior officers
of the Company to whom you report, including, without limitation, the violation
of any material policy of the Company, PMT or any of their respective
subsidiaries applicable to you, (iii) the breach of Section 7 of the
Subscription Agreement or the material breach of any of the provisions of this
Agreement or any Related Agreement (as defined below) and if such breach is
capable of being cured, your failure to cure such breach within 30 days of
receipt of written notice thereof from the Company, (iv) the commission of a
felony, (v) the commission of an act of fraud or financial dishonesty with
respect to the Company, PMT or any of their respective subsidiaries or
affiliates or (vi) any conviction for a crime involving moral turpitude or
fraud. A termination pursuant to this Section 8(a) shall take effect immediately
upon the giving of the notice contemplated hereby. In this Agreement, the term
"Related Agreements" means (i) the Stock Subscription Agreement dated as of the
date hereof between you and PMT (the "Subscription Agreement"), and (ii) the
Stockholders Agreement dated as of the date hereof among PMT, you and the other
stockholders named therein.
(b) The Company may terminate your employment hereunder at any
time without "cause" by giving you written notice of such termination, which
termination shall be effective as of the date set forth in such notice, provided
that such date shall not be earlier than the date of the notice.
9. Effect of Termination.
---------------------
(a) Upon the effective date of a termination of your
employment under this Agreement for any reason other than a termination without
cause pursuant to Section 8(b), neither you nor your beneficiaries or estate
shall have any further rights under this Agreement or any claims against the
Company or any of its subsidiaries or affiliates arising out of this Agreement,
except the right to receive, within 30 days after the effective date of such
termination:
(i) the unpaid portion of the Base Salary provided for
in Section 4, computed on a pro rata basis to the effective date of such
--- ----
termination;
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 5
(ii) reimbursement for any expenses for which you
shall not have theretofore been reimbursed, as provided in Section 5; and
(iii) the unpaid portion of any amounts earned by you
prior to the effective date of such termination pursuant to any benefit program
in which you participated during the Employment Period; provided, however, you
-------- -------
shall not be entitled to receive any benefits under any benefit program that
have accrued during any period if the terms of such program require that the
beneficiary be employed by the Company as of the end of such period.
(b) Upon termination of your employment under this Agreement
pursuant to Section 8(b), neither you nor your beneficiaries or estate shall
have any further rights under this Agreement or any claims against the Company,
PMT or any of their respective subsidiaries or affiliates arising out of this
Agreement, except the right to receive, within 30 days after the effective date
of such termination, in the case of amounts due pursuant to clause (i) below,
and at such other times as provided in clause (ii) and (iii) below in the case
of amounts due thereunder:
(i) the payments, if any, referred to in Section 9(a)
above, to the extent not covered by clause (ii) and (iii) of this Section 9(b);
(ii) the right to continue to receive the Base Salary
for a period equal to the greater of (A) the number of months remaining in the
Employment Period on the effective date of termination or (B) twelve months, in
either case commencing on the first month following the effective date of such
termination, payable during such period in such manner as the Base Salary is
payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your
beneficiaries or estate) receive or are entitled to receive as salary or other
cash compensation from subsequent employment or for services rendered during
such period, up to a maximum of 50% of all amounts due to you under this Section
9(b)(ii). In order to carry out the intent of the immediately preceding
sentence, you agree, for yourself and your beneficiaries or estate, to provide
the Company with such information as the Company may reasonably request
regarding your receipt of salary and other cash compensation from subsequent
employment or for services rendered or to be rendered during or with respect to
such period.
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 6
(iii) the right to receive any bonus payable in
accordance with Section 4(b) with respect to the fiscal year in which such
termination occurs.
Notwithstanding anything in this Agreement to the contrary, your
beneficiaries or estate will be entitled to continue to receive all payments
specified in this Section 9(b) if you die after the date of a termination
without "cause."
10. Disclosure of Information.
-------------------------
(a) From and after the date hereof, you shall not at any
time use or disclose to any person or entity (other than any officer, director,
employee, affiliate or representative of the Company), except as required in
connection with the performance of your duties under and in compliance with this
Agreement and as required by law and judicial process, any Confidential
Information (as hereinafter defined) heretofore acquired or acquired during the
Employment Period for any reason or purpose whatsoever, nor shall you make use
of any of the Confidential Information for your own purposes or for the benefit
of any person or entity except the Company or any subsidiary thereof.
(b) For purposes of this Agreement, "Confidential
Information" shall mean (i) the Intellectual Property Rights (as hereinafter
defined) of the Company and its subsidiaries and (ii) all other information of a
proprietary or confidential nature relating to the Company or any subsidiary
thereof, or the business or assets of the Company or any such subsidiary,
including, without limitation, books, records, agent and independent contractor
lists and related information, customer lists and related information, vendor
lists and related information, supplier lists and related information,
distribution channels, pricing information, cost information, marketing plans,
strategies, forecasts, financial statements, budgets and projections, other than
(i) information which is generally available to the public on the date hereof,
or which becomes generally available to the public after the date hereof without
action by you or (ii) information which you receive from a third party who does
not have any independent obligation to the Company to keep such information
confidential.
(c) As used herein, the term "Intellectual Property Rights"
means all industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 7
applications, trade names, service marks, service mark applications, copyrights,
copyright applications, know-how, certificates of public convenience and
necessity, franchises, licenses, trade secrets, proprietary processes and
formulae, inventions, development tools, marketing materials, instructions,
confidential information, trade dress, logos and designs and all documentation
and media constituting, describing or relating to the foregoing, including,
without limitation, manuals, memoranda and records.
11. Noncompetition Covenant.
-----------------------
(a) You acknowledge and recognize that during the
Employment Period you will be privy to Confidential Information. You further
acknowledge and recognize that the relationships with vendors, agents and
customers of the Company that you have developed prior to the date hereof and
those that you will maintain or develop during the Employment Period with the
use and assistance of the Company and its properties and assets are of special
and unique value to the Company and its affiliates and that the Company would
find it extremely difficult to replace you. Accordingly, in consideration of the
premises contained herein and the consideration you will receive hereunder
(including, without limitation, the severance compensation described in Section
9(b)(ii), if applicable), without the prior written consent of the Company, you
shall not, at any time during the Employment Period and the period beginning on
the effective date of any termination of your employment with the Company and
its subsidiaries and ending on the third anniversary thereof, (a) directly or
indirectly engage in, represent in any way, or be connected with, any Competing
Business (as defined below), whether such engagement shall be as an officer,
director, owner, employee, partner, affiliate or other participant in any
Competing Business, (b) assist others in engaging in any Competing Business in
the manner described in clause (a) above, (c) induce other employees of the
Company, PMT or any of their respective subsidiaries to terminate their
employment with the Company or any of their respective subsidiaries or to engage
in any Competing Business or (d) induce any customer, vendor or agent or any
other person or entity with which the Company or any subsidiary or affiliate
thereof has a business relationship, contractual or otherwise, to terminate or
alter such business relationship. This covenant is considered an integral part
of this Agreement. The foregoing restriction shall not apply to your ownership
of publicly traded securities which represent not more than 5% of the ownership
interests of the issuer.
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 8
(b) You understand that the foregoing restrictions may
limit your ability to earn a livelihood in a business similar to the business of
the Company or any subsidiary or affiliate thereof, but you nevertheless believe
that you have received and will receive sufficient consideration and other
benefits as an employee of the Company and under the terms of this Agreement to
justify clearly such restrictions which, in any event (given your education,
skills and ability), you do not believe would prevent you from earning a living.
(c) As used herein, the term "Competing Business" shall
mean any business conducted in any city or county in any state of the United
States which is engaged in (A) intermodal marketing or (B) providing flatbed
specialized hauling services utilizing owner-operators or agents; provided,
however, that an entity which has separate divisions or business units, one or
more of which are engaged in a business described in clause (A) or (B) hereof,
will not be deemed a Competing Business with respect to those portions of such
entity which are not engaged in a business described in clause (A) or (B) above
so long as the Employee's association with any such separate division or
business unit (fully taking into account his functions and the nature of his
work at such division or business unit) does not relate in any material respect
to such portion of such business which would be a Competing Business hereunder.
(d) Notwithstanding anything contained in this Agreement to
the contrary, if, following the termination of your employment with the Company
and/or its subsidiaries, the Company fails to pay to you any sums due under
Section 9(b)(ii) hereof and (i) you have complied in all material respects with
all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such
failure to pay continues for a period of fifteen (15) days following receipt by
the Company of written notice thereof, the restrictions contained in this
Section 11 shall terminate and be of no further force or effect. Any termination
of the restrictions contained in this Section 11 pursuant to this subsection (d)
shall not affect the Company's obligations under this Agreement or constitute a
waiver by you of any other rights or remedies you may have against the Company
for breach of any term hereof.
12. Inventions Assignment. During the Employment Period, you shall
---------------------
promptly disclose, grant and assign to the Company for its sole use and benefit
any and all inventions, improvements, technical information and suggestions
reasonably
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 9
relating to the business of the Company, PMT or any of their respective
subsidiaries (collectively, the "Inventions") which you may develop or acquire
during the Employment Period (whether or not during usual working hours),
together with all patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or with respect to the Inventions.
In connection therewith (a) you shall, at the expense of the Company (including
a reasonable payment (based on your last per diem earnings) for the time
involved if you are not then in the Company's employ or receiving severance
payments from the Company pursuant to Section 9(b)(ii)), promptly execute and
deliver such applications, assignments, descriptions and other instruments as
may be necessary or proper in the opinion of the Company to vest title to the
Inventions and any patent applications, patents, copyrights, reissues or other
proprietary rights related thereto in the Company and to enable it to obtain and
maintain the entire right and title thereto throughout the world; and (b) you
shall render to the Company, at its expense (including a reasonable payment
(based on your last per diem earnings) for the time involved if you are not then
in the Company's employ or receiving severance payments from the Company
pursuant to Section 9(b)(ii)), reasonable assistance as it may require in the
prosecution of applications for said patents, copyrights, reissues or other
proprietary rights, in the prosecution or defense of interference's which may be
declared involving any said applications, patents, copyrights or other
proprietary rights and in any litigation in which the Company may be involved
relating to the Inventions.
13. Assistance in Litigation. At the request and expense of the
------------------------
Company (including a reasonable payment (based on your last per diem earnings)
for the time involved if you are not then in the Company's employ or receiving
severance payments from the Company pursuant to Section 9(b)(ii)) and upon
reasonable notice, you shall, at all times during and after the Employment
Period, furnish such information and assistance to the Company as it may
reasonably require in connection with any issue, claim or litigation in which
the Company may be involved. If such a request for assistance occurs after the
expiration of the Employment Period, then you will only be required to render
assistance to the Company to the extent that you can do so without materially
affecting your other business obligations.
14. Entire Agreement; Amendment and Waiver. This agreement and the
--------------------------------------
other writings referred to herein contain the entire agreement between the
parties hereto with respect to the
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 10
subject matter hereof and thereof and supersede any prior agreement between you
and the Company or any predecessor of the Company or any of their respective
affiliates (including, without limitation, that certain letter agreement dated
January 29, 1997, among you, Eos Partners, L.P., and the other parties thereto).
No waiver, amendment or modification of any provision of this Agreement shall be
effective unless in writing and signed by each party hereto. The waiver by
either party of a breach of any provision of this Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by such
other party.
15. Notices. All notices or other communications pursuant to this
-------
Agreement shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to the Company, to:
Pacific Motor Transport Company
10007 Oak Tree Court
Littleton, CO 80124
Attention: President
Telecopier: (303) 790-4685
Telephone: (303) 799-1443
with a copy to:
Eos Partners, L.P.
320 Park Avenue
22nd Floor
New York, NY 10022
Attention: Douglas R. Korn
Telecopier: (212) 832-5805
Telephone: (212) 832-5800
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 11
(b) if to you, to:
Mr. Don Orris
10007 Oak Tree Court
Littleton, Colorado 80124
Telecopier: (303) 790-4685
Telephone: (303) 790-4160
16. Headings. The section headings in this Agreement are for
--------
convenience only and shall not control or affect the meaning of any provision of
this Agreement.
17. Severability. In the event that any provision of this
------------
Agreement is determined to be partially or wholly invalid, illegal or
unenforceable in any jurisdiction, then such provision shall, as to such
jurisdiction, be modified or restricted to the extent necessary to make such
provision valid, binding and enforceable, or if such provision cannot be
modified or restricted, then such provision shall, as to such jurisdiction, be
deemed to be excised from this Agreement; provided, however, that the binding
-------- -------
effect and enforceability of the remaining provisions of this Agreement, to the
extent the economic benefits conferred upon the parties by virtue of this
Agreement remain substantially unimpaired, shall not be affected or impaired in
any manner, and any such invalidity, illegality or unenforceability with respect
to such provisions shall not invalidate or render unenforceable such provision
in any other jurisdiction.
18. Remedies. You acknowledge and understand that the provisions
--------
of this Agreement are of a special and unique nature, the loss of which cannot
be adequately compensated for in damages by an action at law, and thus, the
breach or threatened breach of the provisions of this Agreement would cause the
Company irreparable harm. You further acknowledge that in the event of a breach
of any of the covenants contained in paragraphs 10, 11, or 12, the Company shall
be entitled to immediate relief enjoining such violations in any court or before
any judicial body having jurisdiction over such a claim. All remedies hereunder
are cumulative, are in addition to any other remedies provided for by law and
may, to the extent permitted by law, be exercised concurrently or separately,
and the exercise of any one remedy shall not be deemed to be an election of such
remedy or to preclude the exercise of any other remedy.
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 12
19. Representation. You hereby represent and warrant to the Company
--------------
that (a) the execution, delivery and performance of this Agreement by you does
not breach, violate or cause a default under any agreement, contract or
instrument to which you are a party or any judgment, order or decree to which
you are subject and (b) you are not a party to or bound by any employment
agreement, consulting agreement, noncompete agreement, confidentiality agreement
or similar agreement with any other person or entity.
20. Benefits of Agreement; Assignment. The terms and provisions of
---------------------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, representatives, heirs and
estate, as applicable. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other party hereto.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counter part shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
22. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
<PAGE>
Mr. Don C. Orris
March 31, 1997
Page 13
23. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
PACIFIC MOTOR TRANSPORT COMPANY
By:___________________________
Name:
Title:
Accepted and agreed to:
_____________________________
[Name]
<PAGE>
ANNEX A
-------
INCENTIVE BONUS PROGRAM
-----------------------
The Company will pay a cash incentive bonus based upon the Operating
Income (as hereinafter defined) of the Company for each fiscal year set forth
below occurring during the Employment Period. The amount of the Bonus so
payable will be based on the Company's achieving Operating Income (as defined
below) targets set by the President of the Company (which will be identical for
the President of the Company and the Presidents of the Company's PACER and ABL-
TRANS divisions), but which in no event will be lower than the target amounts
set forth below (with the amount of the Bonus payable being calculated
accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income).
For purposes of this Agreement, "Operating Income" means the operating income of
the Company, determined on a consolidated basis (if applicable) and in
accordance with generally accepted accounting principles consistently applied
for the fiscal year in question, as set forth on the audited statement of income
of the Company for the fiscal year in question; provided, however, Operating
-------- -------
Income shall (x) exclude management fees, non-operating gains and losses as
determined by the Board of Directors and such other non-cash items as shall be
determined by the Board of Directors and (y) be determined after giving effect
to any bonus payable by the Company to management or employees of the Company
hereunder or otherwise.
MINIMUM OPERATING INCOME TARGETS
AND CORRESPONDING BONUS CALCULATION
FISCAL YEAR 1997
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,050,000 $ 0
equal to or greater than $35,000
$3,050,000 but less than
$3,150,000
equal to or greater than $41,000
$3,150,000 but less than
$3,250,000
equal to or greater than $47,000
$3,250,000 but less than
$3,350,000
equal to or greater than $53,000
$3,350,000 but less than
$3,450,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $59,000
$3,450,000 but less than
$3,550,000
equal to or greater than $65,000
$3,550,000 but less than
$3,650,000
equal to or greater than $71,000
$3,650,000 but less than
$3,750,000
equal to or greater than $77,000
$3,750,000 but less than
$3,850,000
equal to or greater than $83,000
$3,850,000
</TABLE>
FISCAL YEAR 1998
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,288,400 $ 0
equal to or greater than $35,000
$3,288,400 but less than
$3,388,400
equal to or greater than $41,000
$3,388,400 but less than
$3,488,400
equal to or greater than $47,000
$3,488,400 but less than
$3,588,400
equal to or greater than $53,000
$3,588,400 but less than
$3,688,400
equal to or greater than $59,000
$3,688,400 but less than
$3,788,400
equal to or greater than $65,000
$3,788,400 but less than
$3,888,400
equal to or greater than $71,000
$3,888,400 but less than
$3,988,400
equal to or greater than $77,000
$3,988,400 but less than
$4,088,400
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $83,000
$4,088,400
</TABLE>
FISCAL YEAR 1999
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,561,200 $ 0
equal to or greater than $35,000
$3,561,200 but less than
$3,661,200
equal to or greater than $41,000
$3,661,200 but less than
$3,761,200
equal to or greater than $47,000
$3,761,200 but less than
$3,861,200
equal to or greater than $53,000
$3,861,200 but less than
$3,961,200
equal to or greater than $59,000
$3,961,200 but less than
$4,061,200
equal to or greater than $65,000
$4,061,200 but less than
$4,161,200
equal to or greater than $71,000
$4,161,200 but less than
$4,261,200
equal to or greater than $77,000
$4,261,200 but less than
$4,361,200
equal to or greater than $83,000
$4,361,200
</TABLE>
FISCAL YEAR 2000
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,906,100 $ 0
equal to or greater than $35,000
$3,906,100 but less than
$4,006,100
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $41,000
$4,006,100 but less than
$4,106,100
equal to or greater than $47,000
$4,106,100 but less than
$4,206,100
equal to or greater than $53,000
$4,206,100 but less than
$4,306,100
equal to or greater than $59,000
$4,306,100 but less than
$4,406,100
equal to or greater than $65,000
$4,406,100 but less than
$4,506,100
equal to or greater than $71,000
$4,506,100 but less than
$4,606,100
equal to or greater than $77,000
$4,606,100 but less than
$4,706,100
equal to or greater than $83,000
$4,706,100
</TABLE>
FISCAL YEAR 2001
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $4,152,800 $ 0
equal to or greater than $35,000
$4,152,800 but less than
$4,252,800
equal to or greater than $41,000
$4,252,800 but less than
$4,352,800
equal to or greater than $47,000
$4,352,800 but less than
$4,452,800
equal to or greater than $53,000
$4,452,800 but less than
$4,552,800
equal to or greater than $59,000
$4,552,800 but less than
$4,652,800
equal to or greater than $65,000
$4,652,800 but less than
$4,752,800
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $71,000
$4,752,800 but less than
$4,852,800
equal to or greater than $77,000
$4,852,800 but less than
$4,952,800
equal to or greater than $83,000
$4,952,800
</TABLE>
<PAGE>
PACER INTERNATIONAL, INC.
May 28, 1999
Donald C. Orris
10007 Oak Tree Court
Littleton, Colorado 80124
Re: Amendment to Employment Agreement
---------------------------------
Dear Don:
Reference is made to the Employment Agreement, dated March 31, 1997, (the
"Employment Agreement") between Pacific Motor Transport Company and you. This
letter amendment (the "Letter Amendment") sets forth our agreement with respect
to certain amendments to the Employment Agreement in connection with the merger
(the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer
International, Inc., a Delaware corporation, Mile High Acquisition Corp., a
Delaware corporation ("Sub") and the shareholders of Pacer International, Inc.,
dated February 22, (the "Merger Agreement") for the purposes of assuring your
continued employment with Pacer International, Inc., a Tennessee corporation,
(the "Company") following the Merger and in order to assure Sub of the transfer
of the goodwill of the Company pursuant to the Merger and to protect the trade
secrets and other confidential information of the Company.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company hereby agrees with you as follows:
1. The effectiveness of this Letter Agreement is contingent upon the
closing of the Merger. In the event the Merger is not consummated, this Letter
Agreement will be of no force or effect.
2. Section 2 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the
period (including any extensions thereof, the "Employment Period")
commencing on the closing date of the Merger (the "Commencement Date") and
initially ending on
<PAGE>
the second anniversary of the date hereof. Subject to the applicable
provisions of Section 8 of this Agreement regarding earlier termination,
the Employment Period shall be extended automatically on each anniversary
of the Commencement Date, beginning with the first anniversary thereof for
an additional period of one year.
3. Section 11 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
(a) You will not during the Employment Period and for the period of
three years following date of your termination of employment with the
Company or any of its subsidiaries for any reason (the "Noncompetition
--------------
Period") (i) in any geographic area where the Company conducts business
------
during the Noncompetition Period, engage or participate in directly or
indirectly (whether as an officer, director, employee, partner, consultant,
holder of an equity or debt investment, lender or in any other manner or
capacity, including, without limitation, by the rendering of services or
advice to any person), or lend your name (or any part or variant thereof)
to, any Competing Business (as defined in below); (ii) deal, directly or
indirectly, in a competitive manner with any customers doing business with
the Company during the Noncompetition Period; (iii) solicit or employ any
officer, director or agent of the Company to become an officer, director,
or agent of you, your respective affiliates or anyone else; or (iv) engage
in or participate in, directly or indirectly, any business conducted under
any name that shall be the same as or similar to the name of the Company or
any trade name used by it. Ownership by you for investment of less than 2%
of the outstanding shares of capital stock or class of debt securities of
any corporation with one or more classes of its capital stock listed on a
national securities exchange or actively traded in the over-the-counter
market shall not constitute a breach of the foregoing covenant. You are
entering into the foregoing covenant to assure Sub of the transfer of the
goodwill of the Company, and in order to induce Sub to consummate the
purchase contemplated by the Merger Agreement.
2
<PAGE>
(b) You will not at any time after the date hereof divulge, furnish
to or make accessible to anyone any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable
or not, with respect to any confidential or secret aspects of the business
of the Company (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers); provided,
--------
however, that nothing herein shall prohibit you from complying with any
-------
order or decree of any court of competent jurisdiction or governmental
entity or other requirements of law, but you will give the Company
reasonably timely notice of the receipt of any such order or decree or
legal requirement, and the foregoing provision shall not apply to (i) any
information which is or becomes generally available to the public through
no breach of this Agreement or (ii) is or becomes available to you on a
non-confidential basis from a source who is not, to your knowledge,
prohibited from disclosing the same by any legal or contractual obligation.
(c) As used herein, the term "Competing Business" shall mean any
transportation or other business that the Company or any of its affiliates
has engaged in at any time during the Employment Period in any city or
county in any state of the United States, Canada or Mexico including,
without limitation, any business engaged in (i) intermodal marketing, (ii)
flatbed specialized hauling services, (iii) less-then-truckload common
carrier services, (iv) drayage, consolidation, deconsolidation or
distribution services, (v) contract warehousing, freight handling or
logistic services, (vi) comprehensive transportation management programs or
services to third party customers, (vii) freight consolidation and
deconsolidation, (viii) traffic management, and (ix) railroad signal
project management.
4. Section 22 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Colorado without giving effect to any
choice or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
Please acknowledge your agreement with this Letter Amendment by executing a
counterpart of this Letter Agreement in the appropriate space and returning it
to the Company.
Very truly yours,
PACER INTERNATIONAL, INC.
3
<PAGE>
by __________________________
Acknowledged and Agreed to
this __ day of ________
___________________________
Donald C. Orris
4
<PAGE>
EXHIBIT 10.2
PACIFIC MOTOR TRANSPORT COMPANY
3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
March 31, 1997
Mr. Gerry Angeli
1245 Regents Park Court
DeSoto, Texas 75115
Employment Agreement
--------------------
Dear Gerry:
This letter sets forth the terms of your continued employment with
Pacific Motor Transport Company (the "Company").
1. Duties. On the terms and subject to the conditions contained in
------
this Agreement, you will be employed as the President of PACER, a division of
the Company (the "Company"), and shall perform such duties and services
consistent with such position as may reasonably be assigned to you from time to
time by the Board of Directors or by the President of the Company.
2. Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the period
(including any extensions thereof, the "Employment Period") commencing on the
date hereof (the "Commencement Date") and initially ending on the second
anniversary of the date hereof. Subject to the applicable provisions of Section
8 of this Agreement regarding earlier termination, the Employment Period shall
be extended automatically on each anniversary of the Commencement Date,
beginning with the first anniversary thereof, for an additional period of one
year.
3. Time to be Devoted to Employment. During the Employment Period,
--------------------------------
you will devote your working energies, efforts, interest, abilities and time
exclusively to the business and affairs of the Company. You will not engage in
any other business or activity which, in the reasonable judgment of the Board of
Directors of the Company, would conflict or interfere with the performance of
your duties as set forth herein, whether or not such activity is pursued for
gain, profit or other pecuniary advantage.
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 2
4. Base Salary; Bonus; Benefits.
----------------------------
(a) During the Employment Period, the Company (or any of its
affiliates) shall pay you a minimum annual base salary (the "Base Salary") of
$225,000, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to the payment of regular
compensation to its executive officers. The Base Salary may be increased from
time to time in the sole discretion of the Board of Directors of the Company.
During the Employment Period, you will also be entitled to four weeks vacation
per year and such other benefits as may be made available to other executive
officers of the Company generally, including, without limitation, (i)
participation in such health, life and disability insurance programs and
retirement or savings plans as the Company may from time to time maintain in
effect and (ii) the use of a vehicle provided by the Company or an equivalent
monthly car allowance in accordance with the Company's policy with respect to
its senior executives.
(b) In addition to the Base Salary and benefits set forth in
paragraph (a) above, you will be entitled to receive a cash incentive bonus, if
any, with respect to each fiscal year of the Company occurring during the
Employment Period, as provided in this paragraph. The bonus, if any, for each
fiscal year of the Company ending on or prior to December 31, 2001, shall be
calculated in the manner set forth on Annex A attached to this Agreement and
-------
shall be due and payable as soon as practicable, but in no event later than 30
days, following the Company's receipt from its public accountants of the audited
financial statements of the Company. If your employment with the Company is
terminated for any reason other than without "cause" pursuant to Section 8(b),
the Company will not pay you a bonus with respect to the fiscal year in which
your employment is terminated or thereafter. If your employment with the Company
is terminated without "cause" as provided in Section 8(b) below, you will be
entitled to receive that portion of the bonus payable for such fiscal year pro
rated through the date of such termination based on the number of days elapsed
through the termination date over 365 days, payable in accordance with the
second sentence of this Section 4(b). For each fiscal year ending after December
31, 2001, the amount of the bonus and the criteria therefor shall be determined
by the Board of Directors. In the event that the Company consummates any mergers
or acquisitions (whether of assets, stock or other interests) or other
extraordinary transactions, the Board of Directors shall in good faith make such
adjustments to the targets set forth on
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 3
Annex A for Operating Income (as defined on Annex A) to take into account the
- ------- -------
effects of any such acquisition or transaction.
5. Reimbursement of Expenses. During the Employment Period, the
-------------------------
Company shall reimburse you in accordance with Company policy for all reasonable
and necessary traveling expenses and other disbursements incurred by you for or
on behalf of the Company in connection with the performance of your duties
hereunder upon presentation of appropriate receipts or other documentation
therefor, in accordance with all applicable policies of the Company.
6. Options. The Company will grant you options (the "Options") to
-------
purchase shares of common stock, $.01 par value (the "Common Stock"), of the
Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan").
The Options will be evidenced by a Stock Option Agreement between you and the
Company. The Option Plan and the Stock Option Agreement will contain all of the
terms and conditions of your Options.
7. Disability or Death. If, during the Employment Period, you are
-------------------
incapacitated or disabled by accident, sickness or otherwise (hereinafter, a
"Disability") so as to render you mentally or physically incapable of performing
the services required to be performed by you under this Agreement for an
aggregate of 210 days in any period of 360 consecutive days, the Company may, at
any time thereafter, at its option, terminate your employment under this
Agreement immediately upon giving you written notice to that effect. In the
event of your death, your employment will be deemed terminated as of the date of
death.
8. Termination.
-----------
(a) The Company may terminate your employment hereunder at any
time for "cause" by giving you written notice of such termination, with
reasonable specificity of the grounds therefor. For purposes of this Section 8,
"cause" shall mean (i) willful misconduct with respect to the business and
affairs of the Company, PMT Holdings, Inc. ("PMT") or any of their respective
subsidiaries, (ii) willful neglect of your duties or the failure to follow the
lawful directions of the Board or more senior officers of the Company to whom
you report, including, without limitation, the violation of any material policy
of the Company, PMT or any of their respective subsidiaries applicable to you,
(iii) the breach of Section 6.2(h) of the Restricted Stock Agreement (as defined
below) or the material breach of any of the provisions of this Agreement or any
Related Agreement (as
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 4
defined below) and if such breach is capable of being cured, your failure to
cure such breach within 30 days of receipt of written notice thereof from the
Company, (iv) the commission of a felony, (v) the commission of an act of fraud
or financial dishonesty with respect to the Company, PMT or any of their
respective subsidiaries or affiliates or (vi) any conviction for a crime
involving moral turpitude or fraud. A termination pursuant to this Section 8(a)
shall take effect immediately upon the giving of the notice contemplated hereby.
In this Agreement, the term "Related Agreements" means (i) the Restricted Stock
Issuance and Stock Purchase Agreement dated as of the date hereof between you
and PMT (the "Restricted Stock Agreement"), and (ii) the Stockholders Agreement
dated as of the date hereof among PMT, you and the other stockholders named
therein.
(b) The Company may terminate your employment hereunder at any
time without "cause" by giving you written notice of such termination, which
termination shall be effective as of the date set forth in such notice, provided
that such date shall not be earlier than the date of the notice. You will be
employed by the Company at a facility located within a 50 mile radius of DeSoto,
Texas. The Company may not require you to relocate from this location unless the
Company moves all or substantially all of the Pacer division, in which case you
may be required by the Company to work at such new location.
9. Effect of Termination.
---------------------
(a) Upon the effective date of a termination of your employment
under this Agreement for any reason other than a termination without cause
pursuant to Section 8(b), neither you nor your beneficiaries or estate shall
have any further rights under this Agreement or any claims against the Company
or any of its subsidiaries or affiliates arising out of this Agreement, except
the right to receive, within 30 days after the effective date of such
termination:
(i) the unpaid portion of the Base Salary provided for in
Section 4, computed on a pro rata basis to the effective date of such
--- ----
termination;
(ii) reimbursement for any expenses for which you shall not
have theretofore been reimbursed, as provided in Section 5; and
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 5
(iii) the unpaid portion of any amounts earned by you prior
to the effective date of such termination pursuant to any benefit program in
which you participated during the Employment Period; provided, however, you
-------- -------
shall not be entitled to receive any benefits under any benefit program that
have accrued during any period if the terms of such program require that the
beneficiary be employed by the Company as of the end of such period.
(b) Upon termination of your employment under this Agreement
pursuant to Section 8(b), neither you nor your beneficiaries or estate shall
have any further rights under this Agreement or any claims against the Company,
PMT or any of their respective subsidiaries or affiliates arising out of this
Agreement, except the right to receive, within 30 days after the effective date
of such termination, in the case of amounts due pursuant to clause (i) below,
and at such other times as provided in clause (ii) and (iii) below in the case
of amounts due thereunder:
(i) the payments, if any, referred to in Section 9(a)
above, to the extent not covered by clause (ii) and (iii) of this Section 9(b);
(ii) the right to continue to receive the Base Salary for a
period of twenty-four months commencing on the first month following the
effective date of such termination, payable during such period in such manner as
the Base Salary is payable pursuant to Section 4(a), reduced by 50% of any
amounts you (or your beneficiaries or estate) receive or are entitled to receive
as salary or other cash compensation from subsequent employment or for services
rendered during such period, up to a maximum of 50% of all amounts due to you
under this Section 9(b)(ii). In order to carry out the intent of the immediately
preceding sentence, you agree, for yourself and your beneficiaries or estate, to
provide the Company with such information as the Company may reasonably request
regarding your receipt of salary and other cash compensation from subsequent
employment or for services rendered or to be rendered during or with respect to
such period; and
(iii) the right to receive any bonus payable in accordance
with Section 4(b) with respect to the fiscal year in which such termination
occurs.
Notwithstanding anything in this Agreement to the contrary, your
beneficiaries or estate will be entitled to
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 6
continue to receive all payments specified in this Section 9(b) if you die after
the date of a termination without "cause."
10. Disclosure of Information.
-------------------------
(a) From and after the date hereof, you shall not at any time
use or disclose to any person or entity (other than any officer, director,
employee, affiliate or representative of the Company), except as required in
connection with the performance of your duties under and in compliance with this
Agreement and as required by law and judicial process, any Confidential
Information (as hereinafter defined) heretofore acquired or acquired during the
Employment Period for any reason or purpose whatsoever, nor shall you make use
of any of the Confidential Information for your own purposes or for the benefit
of any person or entity except the Company or any subsidiary thereof.
(b) For purposes of this Agreement, "Confidential Information"
shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the
Company and its subsidiaries and (ii) all other information of a proprietary or
confidential nature relating to the Company or any subsidiary thereof, or the
business or assets of the Company or any such subsidiary, including, without
limitation, books, records, agent and independent contractor lists and related
information, customer lists and related information, vendor lists and related
information, supplier lists and related information, distribution channels,
pricing information, cost information, marketing plans, strategies, forecasts,
financial statements, budgets and projections, other than (i) information which
is generally available to the public on the date hereof, or which becomes
generally available to the public after the date hereof without action by you or
(ii) information which you receive from a third party who does not have any
independent obligation to the Company to keep such information confidential.
(c) As used herein, the term "Intellectual Property Rights"
means all industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyrights,
copyright applications, know-how, certificates of public convenience and
necessity, franchises, licenses, trade secrets, proprietary processes and
formulae, inventions, development tools, marketing materials, instructions,
confidential information, trade dress, logos and designs and all documentation
and media constituting,
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 7
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
11. Noncompetition Covenant.
-----------------------
(a) You acknowledge and recognize that during the Employment
Period you will be privy to Confidential Information. You further acknowledge
and recognize that the relationships with vendors, agents and customers of the
Company that you have developed prior to the date hereof and those that you will
maintain or develop during the Employment Period with the use and assistance of
the Company and its properties and assets are of special and unique value to the
Company and its affiliates and that the Company would find it extremely
difficult to replace you. Accordingly, in consideration of the premises
contained herein and the consideration you will receive hereunder (including,
without limitation, the severance compensation described in Section 9(b)(ii), if
applicable), without the prior written consent of the Company, you shall not, at
any time during the Employment Period and the period beginning on the effective
date of any termination of your employment with the Company and its subsidiaries
and ending on the third anniversary thereof, (a) directly or indirectly engage
in, represent in any way, or be connected with, any Competing Business (as
defined below), whether such engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any Competing Business, (b)
assist others in engaging in any Competing Business in the manner described in
clause (a) above, (c) induce other employees of the Company, PMT or any of their
respective subsidiaries to terminate their employment with the Company or any of
their respective subsidiaries or to engage in any Competing Business or (d)
induce any customer, vendor or agent or any other person or entity with which
the Company or any subsidiary or affiliate thereof has a business relationship,
contractual or otherwise, to terminate or alter such business relationship. This
covenant is considered an integral part of this Agreement. The foregoing
restriction shall not apply to your ownership of publicly traded securities
which represent not more than 5% of the ownership interests of the issuer.
(b) You understand that the foregoing restrictions may limit
your ability to earn a livelihood in a business similar to the business of the
Company or any subsidiary or affiliate thereof, but you nevertheless believe
that you have received and will receive sufficient consideration and other
benefits as an employee of the Company and under the terms of
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 8
this Agreement to justify clearly such restrictions which, in any event (given
your education, skills and ability), you do not believe would prevent you from
earning a living.
(c) As used herein, the term "Competing Business" shall mean any
business conducted in any city or county in any state of the United States which
is engaged in (A) intermodal marketing or (B) providing flatbed specialized
hauling services utilizing owner-operators or agents; provided, however, that an
entity which has separate divisions or business units, one or more of which are
engaged in a business described in clause (A) or (B) hereof, will not be deemed
a Competing Business with respect to those portions of such entity which are not
engaged in a business described in clause (A) or (B) above so long as the
Employee's association with any such separate division or business unit (fully
taking into account his functions and the nature of his work at such division or
business unit) does not relate in any material respect to such portion of such
business which would be a Competing Business hereunder.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if, following the termination of your employment with the Company
and/or its subsidiaries, the Company fails to pay to you any sums due under
Section 9(b)(ii) hereof and (i) you have complied in all material respects with
all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such
failure to pay continues for a period of fifteen (15) days following receipt by
the Company of written notice thereof, the restrictions contained in this
Section 11 shall terminate and be of no further force or effect. Any termination
of the restrictions contained in this Section 11 pursuant to this subsection (d)
shall not affect the Company's obligations under this Agreement or constitute a
waiver by you of any other rights or remedies you may have against the Company
for breach of any term hereof.
12. Inventions Assignment. During the Employment Period, you shall
---------------------
promptly disclose, grant and assign to the Company for its sole use and benefit
any and all inventions, improvements, technical information and suggestions
reasonably relating to the business of the Company, PMT or any of their
respective subsidiaries (collectively, the "Inventions") which you may develop
or acquire during the Employment Period (whether or not during usual working
hours), together with all patent applications, letters patent, copyrights and
reissues thereof that may at any time be granted for or with respect to the
Inventions. In connection therewith (a) you shall, at the
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 9
expense of the Company (including a reasonable payment (based on your last per
diem earnings) for the time involved if you are not then in the Company's employ
or receiving severance payments from the Company pursuant to Section 9(b)(ii)),
promptly execute and deliver such applications, assignments, descriptions and
other instruments as may be necessary or proper in the opinion of the Company to
vest title to the Inventions and any patent applications, patents, copyrights,
reissues or other proprietary rights related thereto in the Company and to
enable it to obtain and maintain the entire right and title thereto throughout
the world; and (b) you shall render to the Company, at its expense (including a
reasonable payment (based on your last per diem earnings) for the time involved
if you are not then in the Company's employ or receiving severance payments from
the Company pursuant to Section 9(b)(ii)), reasonable assistance as it may
require in the prosecution of applications for said patents, copyrights,
reissues or other proprietary rights, in the prosecution or defense of
interference's which may be declared involving any said applications, patents,
copyrights or other proprietary rights and in any litigation in which the
Company may be involved relating to the Inventions.
13. Assistance in Litigation. At the request and expense of the
------------------------
Company (including a reasonable payment (based on your last per diem earnings)
for the time involved if you are not then in the Company's employ or receiving
severance payments from the Company pursuant to Section 9(b)(ii)) and upon
reasonable notice, you shall, at all times during and after the Employment
Period, furnish such information and assistance to the Company as it may
reasonably require in connection with any issue, claim or litigation in which
the Company may be involved. If such a request for assistance occurs after the
expiration of the Employment Period, then you will only be required to render
assistance to the Company to the extent that you can do so without materially
affecting your other business obligations.
14. Entire Agreement; Amendment and Waiver. This agreement and the
--------------------------------------
other writings referred to herein contain the entire agreement between the
parties hereto with respect to the subject matter hereof and thereof and
supersede any prior agreement between you and the Company or any predecessor of
the Company or any of their respective affiliates (including, without
limitation, that certain letter agreement dated January 29, 1997, among you, Eos
Partners, L.P., and the other parties thereto). No waiver, amendment or
modification of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto. The waiver by either party of a breach
of any
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 10
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by such other party.
15. Notices. All notices or other communications pursuant to this
-------
Agreement shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to the Company, to:
Pacific Motor Transport Company
10007 Oak Tree Court
Littleton, CO 80124
Attention: President
Telecopier: (303) 790-4685
Telephone: (303) 799-1443
with a copy to:
Eos Partners, L.P.
320 Park Avenue
22nd Floor
New York, NY 10022
Attention: Douglas R. Korn
Telecopier: (212) 832-5805
Telephone: (212) 832-5800
(b) if to you, to:
Mr. Gerry Angeli
1245 Regents Park Court
DeSoto, Texas 75115
Telephone: (972) 230-3840
Telecopier: (972) 230-3774
16. Headings. The section headings in this Agreement are for
--------
convenience only and shall not control or affect the meaning of any provision of
this Agreement.
17. Severability. In the event that any provision of this Agreement
------------
is determined to be partially or wholly invalid, illegal or unenforceable in any
jurisdiction, then such provision shall, as to such jurisdiction, be modified or
restricted to the
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 11
extent necessary to make such provision valid, binding and enforceable, or if
such provision cannot be modified or restricted, then such provision shall, as
to such jurisdiction, be deemed to be excised from this Agreement; provided,
--------
however, that the binding effect and enforceability of the remaining provisions
- -------
of this Agreement, to the extent the economic benefits conferred upon the
parties by virtue of this Agreement remain substantially unimpaired, shall not
be affected or impaired in any manner, and any such invalidity, illegality or
unenforceability with respect to such provisions shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. Remedies. You acknowledge and understand that the provisions of
--------
this Agreement are of a special and unique nature, the loss of which cannot be
adequately compensated for in damages by an action at law, and thus, the breach
or threatened breach of the provisions of this Agreement would cause the Company
irreparable harm. You further acknowledge that in the event of a breach of any
of the covenants contained in paragraphs 10, 11, or 12, the Company shall be
entitled to immediate relief enjoining such violations in any court or before
any judicial body having jurisdiction over such a claim. All remedies hereunder
are cumulative, are in addition to any other remedies provided for by law and
may, to the extent permitted by law, be exercised concurrently or separately,
and the exercise of any one remedy shall not be deemed to be an election of such
remedy or to preclude the exercise of any other remedy.
19. Representation. You hereby represent and warrant to the Company
--------------
that (a) the execution, delivery and performance of this Agreement by you does
not breach, violate or cause a default under any agreement, contract or
instrument to which you are a party or any judgment, order or decree to which
you are subject and (b) you are not a party to or bound by any employment
agreement, consulting agreement, noncompete agreement, confidentiality agreement
or similar agreement with any other person or entity.
20. Benefits of Agreement; Assignment. The terms and provisions of
---------------------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, representatives, heirs and
estate, as applicable. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other party hereto.
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 12
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counter part shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
22. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
<PAGE>
Mr. Gerry Angeli
March 31, 1997
Page 13
23. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
PACIFIC MOTOR TRANSPORT COMPANY
By:_____________________________
Name:
Title:
Accepted and agreed to:
_____________________________
[Name]
<PAGE>
ANNEX A
-------
INCENTIVE BONUS PROGRAM
-----------------------
The Company will pay a cash incentive bonus based upon the Operating
Income (as hereinafter defined) of the Company for each fiscal year set forth
below occurring during the Employment Period. The amount of the Bonus so
payable will be based on the Company's achieving Operating Income (as defined
below) targets set by the President of the Company (which will be identical for
the President of the Company and the Presidents of the Company's PACER and ABL-
TRANS divisions), but which in no event will be lower than the target amounts
set forth below (with the amount of the Bonus payable being calculated
accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income).
For purposes of this Agreement, "Operating Income" means the operating income of
the Company, determined on a consolidated basis (if applicable) and in
accordance with generally accepted accounting principles consistently applied
for the fiscal year in question, as set forth on the audited statement of income
of the Company for the fiscal year in question; provided, however, Operating
-------- -------
Income shall (x) exclude management fees, non-operating gains and losses as
determined by the Board of Directors and such other non-cash items as shall be
determined by the Board of Directors and (y) be determined after giving effect
to any bonus payable by the Company to management or employees of the Company
hereunder or otherwise.
MINIMUM OPERATING INCOME TARGETS
AND CORRESPONDING BONUS CALCULATION
FISCAL YEAR 1997
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,050,000 $0
equal to or greater than $35,000
$3,050,000 but less than
$3,150,000
equal to or greater than $41,000
$3,150,000 but less than
$3,250,000
equal to or greater than $47,000
$3,250,000 but less than
$3,350,000
equal to or greater than $53,000
$3,350,000 but less than
$3,450,000
equal to or greater than $59,000
$3,450,000 but less than
$3,550,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $65,000
$3,550,000 but less than
$3,650,000
equal to or greater than $71,000
$3,650,000 but less than
$3,750,000
equal to or greater than $77,000
$3,750,000 but less than
$3,850,000
equal to or greater than $83,000
$3,850,000
</TABLE>
FISCAL YEAR 1998
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ---------------------------------
<S> <C>
less than $3,288,400 $0
equal to or greater than $35,000
$3,288,400 but less than
$3,388,400
equal to or greater than $41,000
$3,388,400 but less than
$3,488,400
equal to or greater than $47,000
$3,488,400 but less than
$3,588,400
equal to or greater than $53,000
$3,588,400 but less than
$3,688,400
equal to or greater than $59,000
$3,688,400 but less than
$3,788,400
equal to or greater than $65,000
$3,788,400 but less than
$3,888,400
equal to or greater than $71,000
$3,888,400 but less than
$3,988,400
equal to or greater than $77,000
$3,988,400 but less than
$4,088,400
equal to or greater than $83,000
$4,088,400
</TABLE>
<PAGE>
FISCAL YEAR 1999
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ---------------------------------
<S> <C>
less than $3,561,200 $0
equal to or greater than $35,000
$3,561,200 but less than
$3,661,200
equal to or greater than $41,000
$3,661,200 but less than
$3,761,200
equal to or greater than $47,000
$3,761,200 but less than
$3,861,200
equal to or greater than $53,000
$3,861,200 but less than
$3,961,200
equal to or greater than $59,000
$3,961,200 but less than
$4,061,200
equal to or greater than $65,000
$4,061,200 but less than
$4,161,200
equal to or greater than $71,000
$4,161,200 but less than
$4,261,200
equal to or greater than $77,000
$4,261,200 but less than
$4,361,200
equal to or greater than $83,000
$4,361,200
</TABLE>
FISCAL YEAR 2000
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,906,100 $0
equal to or greater than $35,000
$3,906,100 but less than
$4,006,100
equal to or greater than $41,000
$4,006,100 but less than
$4,106,100
equal to or greater than $47,000
$4,106,100 but less than
$4,206,100
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $53,000
$4,206,100 but less than
$4,306,100
equal to or greater than $59,000
$4,306,100 but less than
$4,406,100
equal to or greater than $65,000
$4,406,100 but less than
$4,506,100
equal to or greater than $71,000
$4,506,100 but less than
$4,606,100
equal to or greater than $77,000
$4,606,100 but less than
$4,706,100
equal to or greater than $83,000
$4,706,100
</TABLE>
FISCAL YEAR 2001
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $4,152,800 $0
equal to or greater than $35,000
$4,152,800 but less than
$4,252,800
equal to or greater than $41,000
$4,252,800 but less than
$4,352,800
equal to or greater than $47,000
$4,352,800 but less than
$4,452,800
equal to or greater than $53,000
$4,452,800 but less than
$4,552,800
equal to or greater than $59,000
$4,552,800 but less than
$4,652,800
equal to or greater than $65,000
$4,652,800 but less than
$4,752,800
equal to or greater than $71,000
$4,752,800 but less than
$4,852,800
equal to or greater than $77,000
$4,852,800 but less than
$4,952,800
equal to or greater than $83,000
$4,952,800
</TABLE>
<PAGE>
PACER INTERNATIONAL, INC.
May 28, 1999
Gerry Angeli
1245 Regents Park Court
Desoto, TX 75115
Re: Amendment to Employment Agreement
---------------------------------
Dear Gerry:
Reference is made to the Employment Agreement, dated March 31, 1997, (the
"Employment Agreement") between Pacific Motor Transport Company and you. This
letter amendment (the "Letter Amendment") sets forth our agreement with respect
to certain amendments to the Employment Agreement in connection with the merger
(the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer
International, Inc., a Delaware corporation, Mile High Acquisition Corp., a
Delaware corporation ("Sub") and the shareholders of Pacer International, Inc.,
dated February 22, (the "Merger Agreement") for the purposes of assuring your
continued employment with Pacer International, Inc., a Tennessee corporation,
(the "Company") following the Merger and in order to assure Sub of the transfer
of the goodwill of the Company pursuant to the Merger and to protect the trade
secrets and other confidential information of the Company.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company hereby agrees with you as follows:
1. The effectiveness of this Letter Agreement is contingent upon the
closing of the Merger. In the event the Merger is not consummated, this Letter
Agreement will be of no force or effect.
2. Section 2 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the
period (including any extensions thereof, the "Employment Period")
commencing on the closing date of the Merger (the "Commencement Date") and
initially ending on the second anniversary of the date hereof. Subject to
the applicable provisions of
<PAGE>
Section 8 of this Agreement regarding earlier termination, the Employment
Period shall be extended automatically on each anniversary of the
Commencement Date, beginning with the first anniversary thereof for an
additional period of one year.
3. Section 11 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
(a) You will not during the Employment Period and for the period of
three years following date of your termination of employment with the
Company or any of its subsidiaries for any reason (the "Noncompetition
--------------
Period")(i) in any geographic area where the Company conducts business
--------
during the Noncompetition Period, engage or participate in directly or
indirectly (whether as an officer, director, employee, partner, consultant,
holder of an equity or debt investment, lender or in any other manner or
capacity, including, without limitation, by the rendering of services or
advice to any person), or lend your name (or any part or variant thereof)
to, any Competing Business (as defined in below); (ii) deal, directly or
indirectly, in a competitive manner with any customers doing business with
the Company during the Noncompetition Period; (iii) solicit or employ any
officer, director or agent of the Company to become an officer, director,
or agent of you, your respective affiliates or anyone else; or (iv) engage
in or participate in, directly or indirectly, any business conducted under
any name that shall be the same as or similar to the name of the Company or
any trade name used by it. Ownership by you for investment of less than 2%
of the outstanding shares of capital stock or class of debt securities of
any corporation with one or more classes of its capital stock listed on a
national securities exchange or actively traded in the over-the-counter
market shall not constitute a breach of the foregoing covenant. You are
entering into the foregoing covenant to assure Sub of the transfer of the
goodwill of the Company, and in order to induce Sub to consummate the
purchase contemplated by the Merger Agreement.
(b) You will not at any time after the date hereof divulge, furnish
to or make accessible to anyone any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable
or not, with respect to any confidential or secret aspects of the business
of the Company (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers); provided,
--------
however, that nothing herein shall prohibit you from complying with any
-------
order or decree of any court of competent jurisdiction or governmental
entity or other requirements of law, but you will give the Company
reasonably timely notice of the receipt of any such order or decree or
legal requirement, and the foregoing provision shall not apply to (i) any
information which is or becomes generally available to the public through
no breach of this Agreement or (ii) is or becomes available to you on a
non-confidential basis from a source who is not, to your knowledge,
prohibited from disclosing the same by any legal or contractual obligation.
2
<PAGE>
(c) As used herein, the term "Competing Business" shall mean any
transportation or other business that the Company or any of its affiliates
has engaged in at any time during the Employment Period in any city or
county in any state of the United States, Canada or Mexico including,
without limitation, any business engaged in (i) intermodal marketing, (ii)
flatbed specialized hauling services, (iii) less-then-truckload common
carrier services, (iv) drayage, consolidation, deconsolidation or
distribution services, (v) contract warehousing, freight handling or
logistic services, (vi) comprehensive transportation management programs or
services to third party customers, (vii) freight consolidation and
deconsolidation, (viii) traffic management, and (ix) railroad signal
project management.
4. Section 22 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Texas without giving effect to any choice
or conflict of law provision or rule (whether of the State of Texas or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Texas.
Please acknowledge your agreement with this Letter Amendment by executing a
counterpart of this Letter Agreement in the appropriate space and returning it
to the Company.
Very truly yours,
PACER INTERNATIONAL, INC.
by _____________________________
Acknowledged and Agreed to
this __ day of ________
________________________________
Gerry Angeli
3
<PAGE>
EXHIBIT 10.3
PMT HOLDINGS, INC.
3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
December 16, 1997
Mr. Gary I. Goldfein
229 N. Cliffwood Ave.
Los Angeles, CA 90049
Employment Agreement
--------------------
Dear Gary:
This letter sets forth the terms of your employment with PMT Holdings,
Inc. ("Holdings"), Interstate Consolidation, Inc. ("ICI"), and Interstate
-------- ---
Consolidation Service, Inc. ("ICSI"). ICI and ICSI (together, "Interstate") are
----
wholly owned subsidiaries of Holdings. Holdings, ICI and ICSI are each herein
referred to as a "Company" and collectively as the "Companies".
------- ---------
Section 1. Duties. On the terms and subject to the conditions
------
contained in this Agreement, you will be employed as the Executive Vice
President of Holdings and as the President and Chief Executive Officer of each
of ICI and ICSI, and will have complete authority and responsibility for ICI's
and ICSI's international and domestic consolidation, drayage and related
intermodal marketing operations (including the operations of ABL-TRANS),
reporting to and subject to the supervision and direction of the Board of
Directors and the Chairman of the Board of each Company (provided, however, that
-------- -------
you will not be required to relocate your principal office to any location
outside a 50 mile radius from your current principal office located at 5800 East
Sheila Street, Los Angeles, California).
Section 2. Term. Unless sooner terminated in accordance with the
----
applicable provisions of this Agreement, your employment hereunder shall be for
the period (the "Employment Period") commencing on the date hereof (the
-----------------
"Commencement Date") and ending on December 31, 2000.
-----------------
Section 3. Time to be Devoted to Employment. During the Employment
--------------------------------
Period, you will devote substantially all of your working energies, efforts,
interest, abilities and time during normal business hours exclusively to the
business and affairs of the Companies (except for reasonable time devoted to the
procedures contemplated by Article III of the Purchase Agreement (as defined in
Section 9(a) below) on your own behalf). You will not engage in any other
business or activity which, in the
1
<PAGE>
reasonable judgment of the Board or the Chairman of each Company, as applicable,
would conflict or interfere, in any material respect, with the performance of
your duties as set forth herein, whether or not such activity is pursued for
gain, profit or other pecuniary advantage.
Section 4. Base Salary; Bonus; Benefits.
----------------------------
(a) During the Employment Period, you will be entitled to a minimum
annual base salary (the "Base Salary") of $235,000, payable by Interstate in
such installments (but not less often than bi-weekly) as is generally the policy
of the Companies with respect to the payment of regular compensation to its
executive officers. The Base Salary may be increased from time to time in the
sole discretion of Holdings' Board. During the Employment Period, you will also
be entitled to the benefits set forth in Part I on Schedule 4(a) attached
------ -------------
hereto, which include four weeks vacation per year and such other benefits as
may from time to time be made available to other executive officers of the
Companies generally, including, without limitation, (i) participation in such
health, life and disability insurance programs and retirement or savings plans
as the Companies may from time to time maintain in effect (provided, however,
-------- -------
that, during the period ending on the first anniversary of the date hereof (or
April 1, 1999, in the case of group health plans), the Companies will not amend
or modify, in any manner that would have a materially adverse effect on the
benefits made available thereunder, any of the employee benefit plans and
programs set forth in Part II on Schedule 4(a) attached hereto that are
------- -------------
maintained by ICI and ICSI required to be maintained by Section 7.6 of the
Purchase Agreement; provided further, however, that you may elect to not be
-------- ------- -------
covered by the Companies benefit plans by so notifying the Companies, and the
Companies shall pay you an amount equal to the benefits cost savings realized by
the Company, as reasonably determined by the Companies and you in consultation
with the Companies' benefits consultants), (ii) participation in such stock
option plans of Holdings as may be adopted from time to time for the executive
officers of the Companies on terms determined by the Board of Holdings and (iii)
during the Employment Period and for a period of six years thereafter, with
respect to your position as a director or officer (as the case may be),
directors' and officers' liability insurance. Part III of Schedule 4(a)
attached hereto sets forth the benefits made available on the date hereof to the
other executive officers of Holdings and its subsidiaries generally.
(b) In addition to the Base Salary and benefits set forth in paragraph
(a) above, during the Employment Period you will be entitled to receive a bonus,
if any, with respect to each full calendar year occurring during the Employment
Period, commencing with the calendar year ending December 31, 1998, such bonus
to be paid in a lump sum following the end of the calendar year with respect to
which such bonus is payable (such payment to be made at the same time
performance bonuses are paid to the other senior managers of Holdings and its
subsidiaries). If your employment with the Companies is terminated for any
reason other than without "cause" pursuant to Section 8(b), the Companies will
not pay you a bonus with respect to the calendar year in which your employment
is terminated or thereafter. If your employment with the Companies is
terminated without "cause" pursuant to Section 6(b) below, you will be entitled
to receive that portion of the bonus payable for the calendar year during which
such termination occurs pro rated through the date of such termination based on
the number of days
2
<PAGE>
elapsed through the termination date over 365 days, payable in accordance with
first sentence of this Section 4(b). The bonus payable for each such calendar
year shall be subject to and determined based on the achievement by Holdings and
its subsidiaries of specified performance targets applicable to the other senior
managers of Holdings and its subsidiaries, such bonus to range from $35,000 upon
the achievement of the minimum specified targets to $90,000 upon the achievement
of the maximum specified targets. The minimum specified target for the year
ending December 31, 1998, is $9.0 million in Operating Income (as defined on
Schedule 4(b)) and the maximum specified target for the year ending December 31,
1998, is $9.9 million in Operating Income (as defined on Schedule 4(b)), subject
in each case to the adjustment of such targets pursuant to Schedule 4(b).
Section 5. Reimbursement of Expenses. During the Employment Period,
-------------------------
the Companies shall reimburse you in accordance with their policies for all
reasonable and necessary traveling expenses and other disbursements incurred by
you for or on behalf of the Companies in connection with the performance of your
duties hereunder upon presentation of appropriate receipts or other
documentation therefor, in accordance with all applicable policies of the
Companies.
Section 6. Termination.
-----------
(a) Holdings may terminate your employment hereunder at any time for
"cause" by giving you written notice of such termination, with reasonable
specificity of the grounds therefor. For purposes of this Section 6, "cause"
shall mean any of the following (whether occurring before or after the date
hereof): (i) willful misconduct with respect to the business and affairs of the
Companies or any of their respective subsidiaries, (ii) willful neglect of your
duties or the failure to follow the lawful and reasonable directions of the
Board or the Chairman of each Company, including, without limitation, the
violation of any material written policy (or oral policy of which you are aware)
of the Companies or any of their respective subsidiaries applicable to you, and,
if such neglect or failure is capable of being cured, your failure to cure the
same as soon as practicable, but in any event within 30 days of receipt of
written notice thereof from Holdings, (iii) the material breach of any of the
provisions of this Agreement, and, if such breach is capable of being cured,
your failure to cure such breach as soon as practicable, but in any event within
30 days of receipt of written notice thereof from Holdings, (iv) the commission
of a felony, (v) the commission of an act of fraud or financial dishonesty with
respect to any of the Companies or their respective subsidiaries or affiliates
or (vi) any conviction for a crime involving moral turpitude or fraud. A
termination pursuant to this Section 6(a) shall take effect immediately upon the
giving of notice contemplated hereby (subject to any applicable cure period).
(b) Holdings may terminate your employment hereunder at any time
without "cause" by giving you written notice of such termination, which
termination shall be effective as of the date set forth in such notice, provided
that such date shall not be earlier than the date of such notice (provided that
you shall be afforded a reasonable period of time after such termination to
remove your personal effects from the Companies' premises). Any material breach
of Section 1 of this Agreement by any of the
3
<PAGE>
Companies that remains uncured for more than 30 days after your delivery to the
Companies of written notice of such breach shall be deemed to be a termination
without "cause" for purposes of this Agreement. For purposes of the immediately
preceding sentence, a substantial reduction of your duties, responsibilities and
status set forth in Section 1 of this Agreement shall be deemed to be a
"material breach" of such Section 1.
(c) If, during the Employment Period, you are incapacitated or disabled
by accident, sickness or otherwise so as to render you mentally or physically
incapable of performing substantially all of the services required to be
performed by you under this Agreement for an aggregate of 210 days in any period
of 360 consecutive days (hereinafter, a "Disability"), the Companies may, at any
time thereafter, at their option, terminate your employment under this Agreement
immediately upon giving you written notice to that effect. In the event of your
death, your employment will be deemed terminated as of the date of your death.
Section 7. Effect of Termination.
---------------------
(a) Upon the effective date of a termination of your employment under
this Agreement for any reason other than a termination without cause pursuant to
Section 6(b), neither you nor your beneficiaries or estate shall have any
further rights under this Agreement or any claims against the Companies or any
of their respective subsidiaries or affiliates arising out of this Agreement,
except the right to receive the following as soon as reasonably practicable
following the effective date of such termination (but in any event within the
applicable time period (if any) mandated by applicable law):
(i) the unpaid portion of the Base Salary payable pursuant to
Section 4, computed on a pro rata basis to the effective date of such
--- ----
termination;
(ii) reimbursement for any expenses for which you shall not have
theretofore been reimbursed, as provided in Section 5; and
(iii) the unpaid portion of any amounts earned by you prior to the
effective date of such termination pursuant to any benefit program in which
you participated during the Employment Period; provided, however, that you
-------- -------
shall not be entitled to receive any benefits under any benefit program
that have accrued during any period if the terms of such program require
that the beneficiary be employed by a Company as of the end of such period.
(b) Upon termination of your employment under this Agreement pursuant
to Section 6(b), neither you nor your beneficiaries or estate shall have any
further rights under this Agreement or any claims against the Companies or any
of their respective subsidiaries or affiliates arising out of this Agreement,
except the right to receive the following, as soon as reasonably practicable
following the effective date of such termination (but in any event within the
applicable time period (if any) mandated by applicable law in the case of
amounts due pursuant to clause (i) below, and at such other times as provided in
clauses (ii) and (iii) below in the case of amounts due thereunder):
4
<PAGE>
(i) the payments, if any, referred to in Section 7(a) above,
to the extent not covered by clause (ii) of this Section 7(b);
(ii) the right to continue to receive the Base Salary from the
effective date of such termination until December 31, 2000, payable during
such period in such manner as the Base Salary is payable pursuant to
Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or
estate) receive or are entitled to receive as salary or other cash
compensation from your subsequent employment or for services rendered by
you for one or more other parties (other than such services that are
rendered by you in the aggregate for less than 20 hours per calendar week
and less than 260 hours per calendar quarter) during such period (other
than such compensation earned by you from a business controlled by you), up
to a maximum of 50% of all amounts due to you under this Section 7(b)(ii)
(in order to carry out the intent of the immediately preceding sentence,
you agree, for yourself and your beneficiaries or estate, to provide the
Companies with such information as the Companies may reasonably request
regarding your receipt of salary and other cash compensation from
subsequent employment or for services rendered or to be rendered during or
with respect to such period); and
(iii) the right to receive any bonus payable in accordance with
Section 4(b) with respect to the fiscal year in which such termination
occurs.
Notwithstanding anything contained in this Agreement to the contrary, your
beneficiaries or estate will be entitled to continue to receive all payments
specified in this Section 7(b) if you die after the date of a termination
without "cause."
Section 8. Disclosure of Information.
-------------------------
(a) From and after the date hereof, you shall not at any time use or
disclose to any person or entity (other than any officer, director, employee,
affiliate or representative of the Companies), except as required in connection
with the performance of your duties under and in compliance with this Agreement
and as required by law and judicial process, any Confidential Information (as
hereinafter defined) heretofore acquired or acquired during the Employment
Period for any reason or purpose whatsoever, nor shall you make use of any of
the Confidential Information for your own purposes or for the benefit of any
person or entity except the Companies or their respective subsidiaries.
(b) For purposes of this Agreement, "Confidential Information" shall
mean (i) the Intellectual Property Rights (as hereinafter defined) of the
Companies and their respective subsidiaries and affiliates and (ii) all other
information of a proprietary or confidential nature relating to the Companies or
their respective subsidiaries and affiliates, or the business or assets of the
Companies or their respective subsidiaries and affiliates, including, without
limitation, books, records, agent and independent contractor lists and related
information, customer lists and related information, vendor lists and related
information, supplier lists and related information, distribution channels,
pricing information, cost information, marketing plans, strategies, forecasts,
financial statements,
5
<PAGE>
budgets and projections, other than, with respect to both clauses (i) and (ii),
(x) information which is generally available to the public on the date hereof,
or which becomes generally available to the public after the date hereof without
action by you, or (y) information which you receive from a third party who does
not have any independent obligation to any of the Companies or their respective
subsidiaries or affiliates to keep such information confidential.
(c) As used herein, the term "Intellectual Property Rights" means all
industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
applications, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes and formulae,
inventions, development tools, marketing materials, instructions, confidential
information, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
Section 9. Noncompetition Covenant.
-----------------------
(a) You acknowledge and recognize that during the Employment Period you
will be privy to Confidential Information. You further acknowledge and
recognize that the relationships with vendors, agents and customers of the
Companies and their respective subsidiaries that you have developed prior to the
date hereof and those that you will maintain or develop during the Employment
Period with the use and assistance of the Companies and their respective
subsidiaries, and their respective properties and assets, are of special and
unique value to the Companies and their affiliates and that the Companies would
find it extremely difficult to replace you. In addition, you acknowledge and
agree that this Agreement is being executed and delivered in connection with,
and as a mutual condition to the respective obligations of the parties at the
closing on the date hereof under, the Stock Purchase Agreement dated as of the
date hereof (the "Purchase Agreement") between each of the Companies, you and
the other seller thereunder; provided, however, that the Companies agree that a
-------- -------
breach by you of this Section 9 shall in no event constitute a breach under the
Purchase Agreement (it being acknowledged by you, however, that this proviso
shall in no way limit or affect the separate and independent provisions of
Section 7.4 of the Purchase Agreement). As a material inducement to Holdings to
enter into and perform its obligations under the Purchase Agreement, and in
consideration of the payments and other benefits (including the further
experience and expertise to be gained during your employment hereunder) to be
received by you under the Purchase Agreement and this Agreement (including,
without limitation, the severance compensation described in Section 7(b)(ii), if
applicable), you shall not, without the prior written consent of the Companies,
at any time during the Employment Period and the period beginning on the
effective date of any termination of your employment with the Companies and
their respective subsidiaries or affiliates and ending on the later of (i) the
second anniversary thereof and (ii) the fifth anniversary of the Commencement
Date, (a) directly or indirectly engage in, represent in any way, or be
connected with, any Competing Business (as defined below), whether such
engagement shall be as an officer, director, owner, employee, partner, affiliate
or
6
<PAGE>
other participant in any Competing Business, (b) assist others in engaging in
any Competing Business in any manner described in clause (a) above, (c) induce
other employees of the Companies or any of their respective subsidiaries or
affiliates to terminate their employment with any of the Companies or any of
their respective subsidiaries or affiliates or to engage in any Competing
Business or in any manner described in clause (a) above or (d) induce any
customer, vendor or agent or any other person or entity with which any of the
Companies or their respective subsidiaries or affiliates has a business
relationship to terminate or alter such business relationship. This covenant is
considered an integral part of this Agreement. The foregoing restriction shall
not apply to your ownership of publicly traded securities which represent not
more than 5% of the ownership interests of the issuer.
(b) You understand that the foregoing restrictions may limit your
ability to earn a livelihood in a business similar to the business of any of the
Companies or any subsidiary or affiliate thereof, but you nevertheless believe
that you have received and will receive sufficient consideration and other
benefits under the Purchase Agreement and as an employee of the Companies and
under the terms of this Agreement to justify clearly such restrictions which, in
any event (given your education, skills and ability), you do not believe would
prevent you from earning a living.
(c) As used herein, the term "Competing Business" shall mean any
------------------
business engaged in providing any of the following transportation services to
third party customers:
(i) intermodal marketing or transportation services in any
city or county in any state or province located in the continental United
States, Canada or Mexico;
(ii) less-then-truckload common carrier services in any city or
county in any state or province located in the continental United States,
Canada or Mexico;
(iii) intra-state trucking of truckload or less-than-truckload
freight in any city or county located in the state of California;
(iv) drayage, consolidation, deconsolidation or distribution
services in any city or county in any state or province located in the
continental United States, Canada or Mexico where any of the Companies
conducts business or provides any drayage, consolidation, deconsolidation
or distribution services at the time of, or where there are fixed plans for
any of the Companies to conduct business or provide any drayage,
consolidation, deconsolidation or distribution services at any time within
12 months after, the termination of your employment with the Companies; or
(v) contract warehousing, freight handling or logistics
services in any city or county in any state or province located in the
continental United States, Canada or Mexico where any of the Companies
conducts business or
7
<PAGE>
provides such services at the time of, or where there are fixed plans for
any of the Companies to conduct business or provide such services at any
time within 12 months after, the termination of your employment with the
Companies.
Anything contained in the immediately preceding sentence to the contrary
notwithstanding,
(A) any entity which has separate divisions or
business units, one or more of which are engaged in a business described in
the immediately preceding sentence, will not be deemed to be a Competing
Business with respect to those separate divisions or business units of such
entity that are not engaged in a business described in the immediately
preceding sentence so long as your association with any such separate
division or business unit (fully taking into account your functions and the
nature of your work at such division or business unit) does not (1) involve
existing customers of any of the Companies at the time of the termination
of your employment with the Companies or former customers of any of the
Companies at any time during the 12 months preceding such termination or
(2) relate in any material respect to such portion of such business which
would be a Competing Business hereunder;
(B) the provision of consulting services to a direct
shipper who is not a customer of any of the Companies at the time of the
termination of your employment with the Companies, or a former customer of
any of the Companies at any time during the 12 months preceding such
termination, shall not be deemed to be "engaging in a Competing Business"
for purposes of this SECTION 9; and
---------
(C) the provision of any drayage, consolidation,
deconsolidation, distribution, contract warehousing, freight handling or
logistics services in any location described in clause (iv) or (v) of the
immediately preceding sentence shall only be deemed to be a "Competing
Business" if (1) you were the President or Chief Executive Officer of any
Company (or any of its separate divisions or business units), that was
engaged in providing any drayage, consolidation, deconsolidation,
distribution, contract warehousing, freight handling or logistics services
at the time of (or at any time within the 12 months prior to) the
termination of your employment with the Companies or where such Company (or
such division or business unit) had fixed plans at the time of such
termination to provide any drayage, consolidation, deconsolidation,
distribution, contract warehousing, freight handling or logistics services
at any time within 12 months after such termination, or (2) any drayage,
consolidation, deconsolidation, distribution, contract warehousing, freight
handling or logistics services are being provided to any Person who was a
customer of the Company at the time of the termination of your employment
with the Companies or at any time during the 12 months prior to such
termination.
Section 10. Inventions Assignment. During the Employment Period, you
---------------------
shall promptly disclose, grant and assign to the Companies for their sole use
and benefit
8
<PAGE>
any and all inventions, improvements, technical information and suggestions
reasonably relating to the business of the Companies or any of their respective
subsidiaries or affiliates (collectively, the "Inventions") which you may
develop or acquire during the Employment Period (whether or not during usual
working hours), together with all patent applications, letters patent,
copyrights and reissues thereof that may at any time be granted for or with
respect to the Inventions. In connection therewith (a) you shall, at the expense
of the Companies (including a reasonable payment (based on your last per diem
earnings) for the time involved if you are not then in the employ of any of the
Companies or receiving severance payments from the Companies pursuant to Section
7(b)(ii)), promptly execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or proper in the opinion
of the Companies to vest title to the Inventions and any patent applications,
patents, copyrights, reissues or other proprietary rights related thereto in the
Companies and to enable them to obtain and maintain the entire right and title
thereto throughout the world; and (b) you shall render to the Companies, at
their expense (including a reasonable payment (based on your last per diem
earnings) for the time involved if you are not then in the employ of any of the
Companies or receiving severance payments from the Companies pursuant to Section
7(b)(ii)), such reasonable assistance as they may require in the prosecution of
applications for said patents, copyrights, reissues or other proprietary rights,
in the prosecution or defense of interferences which may be declared involving
any said applications, patents, copyrights or other proprietary rights and in
any litigation in which any of the Companies may be involved relating to the
Inventions.
Section 11. Assistance in Litigation.
------------------------
(a) At all times during the Employment Period, and thereafter upon
reasonable notice from the Board or the Chairman of Holdings you shall furnish
such information and assistance to the Companies as any of them may reasonably
require in connection with the actions entitled Irwin Albillo et. al. v.
------------------------
Intermodal Container Service, Inc. et. al. (Case No. B0174508), and Paul
- ------------------------------------------ ----
Cardoza, et al., vs. Air Rail Truck Service-Air Cargo, et al. (Case No. BC 153
- ------------------------------------------------------------------------------
522), as any such action may be amended, modified, restated or refiled, whether
- ------
by the plaintiffs Albillo, Cardoza or one or more other independent contractor
drivers against one or more of the Companies and the Subsidiary asserting claims
based on the facts alleged in the Albillo action or the Cardoza action cited
------- -------
above. Such information and assistance shall include, but not be limited to,
appearing from time to time at the offices of the Companies or Companies'
counsel for conferences and interviews and in general providing the officers of
the Companies, the Companies and Companies' counsel with the full benefit of
your knowledge with respect to such actions. The Companies shall pay or
reimburse you for all reasonable out-of-pocket expense incurred by you in
connection with your furnishing such information and assistance upon
presentation of appropriate receipts or other documentation therefor.
(b) At all times during the Employment Period, and thereafter upon
reasonable notice from the Board or the Chairman and at the expense of the
Companies (including a reasonable payment (based on your last per diem earnings)
for the time involved if you are not then in the employ of any of the Companies
or collecting payments pursuant to Section 7(b)), you shall furnish such
information and assistance to
9
<PAGE>
the Companies as any of them may reasonably require in connection with any
issue, claim or litigation in which any of the Companies may be involved
(excluding the matters covered by Section 11(a) above). Such information and
assistance shall include, but not be limited to, appearing from time to time at
the offices of the Companies or Companies' counsel for conferences and
interviews and in general providing the officers of the Companies, the Companies
and Companies' counsel with the full benefit of your knowledge with respect to
such issue, claim or litigation.
Section 12. Entire Agreement; Amendment and Waiver. This Agreement
--------------------------------------
embodies the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any and all
prior and contemporaneous understandings, agreements, arrangements or
representations by or among the parties, written or oral, which may relate to
the subject matter hereof in any way. Other than this Agreement, there are no
other agreements continuing in effect relating to the subject matter hereof
(except that the parties acknowledge the existence of the separate and
independent provisions contained in Section.7.4 of the Purchase Agreement). No
waiver, amendment or modification of any provision of this Agreement shall be
effective unless in writing and signed by each party hereto. The waiver by
either party of a breach of any provision of this Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by such
other party.
Section 13. Notices. All notices or other communications pursuant to
-------
this Agreement shall be in writing and shall be deemed to be sufficient if
delivered personally, telecopied, sent by nationally-recognized, overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
if to any Company, to:
PMT Holdings, Inc.
3746 Mt. Diablo Boulevard, Suite 100
Lafayette, CA 94549
Attention: Chairman of the Board
Telecopier: (510) 299-
Telephone: (510) 283-1938
with a copy to:
Eos Partners, L.P.
320 Park Avenue
22nd Floor
New York, NY 10022
Attention: Douglas R. Korn
Telecopier: (212) 832-5815
Telephone: (212) 832-5803
10
<PAGE>
if to you, to:
Mr. Gary I. Goldfein
229 N. Cliffwood Ave.
Los Angeles, CA 90049
Telephone: (310) 471-2974
Telecopier: (310) 471-7483
with copies to:
Manatt, Phelps & Phillips, LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90064
Attention: Ronald S. Barak
Telecopier: (310) 312-4224
Telephone: (310) 312-4000
Mr. Allen E. Steiner
1537 Amalfi Drive
Pacific Palisades, CA 90272-2754
Telephone: (310) 459-3926
Telecopier: (310) 459-8124
Section 14. Headings. The section headings in this Agreement are for
--------
convenience only and shall not control or affect the meaning of any provision of
this Agreement.
Section 15. Severability. In the event that any provision of this
------------
Agreement is determined to be partially or wholly invalid, illegal or
unenforceable in any jurisdiction, then such provision shall, as to such
jurisdiction, be modified or restricted to the extent necessary to make such
provision valid, binding and enforceable, or if such provision cannot be
modified or restricted, then such provision shall, as to such jurisdiction, be
deemed to be excised from this Agreement; provided, however, that the binding
-------- ------
effect and enforceability of the remaining provisions of this Agreement, to the
extent the economic benefits conferred upon the parties by virtue of this
Agreement remain substantially unimpaired, shall not be affected or impaired in
any manner, and any such invalidity, illegality or unenforceability with respect
to such provisions shall not invalidate or render unenforceable such provision
in any other jurisdiction.
Section 16. Remedies. You acknowledge and understand that the
--------
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
thus, the breach or threatened breach of the provisions of this Agreement would
cause the Companies irreparable harm. You further acknowledge that in the
event of a breach of any of the covenants contained in paragraphs 8, 9, or 10,
the Companies shall be entitled to immediate relief enjoining such violations in
any court or before any judicial body having jurisdiction over such a claim.
All remedies hereunder are cumulative, are in addition to
11
<PAGE>
any other remedies provided for by law and may, to the extent permitted by law,
be exercised concurrently or separately, and the exercise of any one remedy
shall not be deemed to be an election of such remedy or to preclude the exercise
of any other remedy.
Section 17. Representation.
--------------
(a) You hereby represent and warrant to Holdings that (i) the
execution, delivery and performance of this Agreement by you and ICI and ICSI
does not breach, violate or cause a default under any agreement, contract or
instrument to which any of you, ICI or ICSI is a party or any judgment, order or
decree to which any of you, ICI OR ICSI is subject, and (ii) none of you, ICI or
ICSI is a party to or bound by any employment agreement, consulting agreement,
noncompete agreement, confidentiality agreement or similar agreement regarding
your employment or retention with or by any other person or entity.
(b) Holdings hereby represents and warrants to you that the execution,
delivery and performance of this Agreement by Holdings does not breach, violate
or cause a default under any agreement, contract or instrument to which Holdings
is a party or any judgment, order or decree to which Holdings is subject.
Section 18. Benefits of Agreement; Assignment. The terms and
---------------------------------
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, representatives,
heirs and estate, as applicable. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other parties hereto.
Section 19. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
Section 20. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
SECTION 21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO
APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE
12
<PAGE>
OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED
HERETO.
* * * *
13
<PAGE>
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
PMT HOLDINGS, INC.
By:_____________________
Name:
Title:
INTERSTATE CONSOLIDATION, INC.
By:_____________________
Name:
Title:
INTERSTATE CONSOLIDATION SERVICE, INC.
By:_____________________
Name:
Title:
Accepted and agreed to:
________________________
Gary I. Goldfein
14
<PAGE>
SCHEDULE 4(A)
PART I
------
. One German Luxury Company Car each including gasoline, repairs, maintenance,
insurance, taxes, etc. (to be replaced not less often than once every three
years after the date of acquisition of such vehicle)
. Country Club Dues (approx. $475/mo.)
. WPO\YPO Dues (approx. $5,000/yr.)
. YPO Seminars
. Membership in Trade and Business Organizations and airline and automobile club
memberships
. Misc. Business Tools including computer links, cell phones, car phones, etc.
. Health Insurance
. Disability Pay as per standard for employees with 25 years service
. Sick Leave as per standard for employees with 25 years service
. Vacation time as per standard for employees with 25 years Service
PART II
-------
The following are the employee benefits for senior executive officers of
Holdings as of the date hereof:
Group Health Insurance
Connecticut General Life Insurance Company - Policy 2233560-01
Coverage: standard group plan
Group Term Life Insurance
Fortis Benefits Insurance Company - Policy 4009662
Coverage: $350,000
Additional Term Life Insurance
CNA/Valley Forge Life Insurance
Coverage: $700,000
Accidental Death and Dismemberment
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Short Term Disability
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Long Term Disability
15
<PAGE>
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Massachusetts Casualty Insurance Company
Gerry Angeli - $6,200 per month
Robert Cross - $4,750 per month
Group Dental Insurance
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Pacific Motor Transport 401(k) Plan
Merrill Lynch
Company matching contribution: 3% of first 100% if participant's contribution
Company Automobiles
Gerry Angeli - Buick Park Avenue
Bob Cross - Buick Park Avenue
Don Orris - Car Allowance of $1,076 per month
16
<PAGE>
SCHEDULE 4(B)
OPERATING INCOME
----------------
For purposes of Section 4(b) of this Agreement, "Operating Income"
----------------
means, for any calendar year, the earnings before interest expense and interest
income, income taxes and amortization of goodwill and acquisition and financing
fees of Holdings and its subsidiaries, determined on a consolidated basis and in
accordance with generally accepted accounting principles consistently applied
for the calendar year in question, as set forth on the audited consolidated
statement of income of Holdings and its subsidiaries for the fiscal year in
question; provided, however, that Operating Income shall (x) exclude management
-------- -------
fees, transaction expenses, non-operating gains and losses as determined by the
Board of Directors of Holdings and such other non-cash items as shall be
determined by the Board of Directors of Holdings (provided that, with regard to
recognition of income due to customer credit balances and the reversal of prior
period accounts payable, such recognition will be made on a basis consistent
with past practice as to amount and timing of such recognition) and (y) be
determined after giving effect to any and all bonuses payable by Holdings and/or
any of its subsidiaries to management or employees of Holdings and/or any of its
subsidiaries hereunder or otherwise. In the event that Holdings and/or any of
its subsidiaries consummate any mergers or acquisitions (whether of assets,
stock or other interests) or other extraordinary transactions, the Board of
Directors of Holdings shall in good faith make such adjustments to the targets
set forth in Section 4(b) for Operating Income (as defined above) to take into
account the effects of any such acquisition or other extraordinary transaction.
17
<PAGE>
PACER INTERNATIONAL, INC.
May 28, 1999
Gary I. Goldfein
229 N. Cliffwood Ave.
Los Angeles, CA 90049
Re: Amendment to Employment Agreement
---------------------------------
Dear Gary:
Reference is made to the Employment Agreement, dated December 16, 1997,
(the "Employment Agreement") between Pacific Motor Transport Company and you.
This letter amendment (the "Letter Amendment") sets forth our agreement with
respect to certain amendments to the Employment Agreement in connection with the
merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst
Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp.,
a Delaware corporation ("Sub") and the shareholders of Pacer International,
Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring
your continued employment with Pacer International, Inc., a Tennessee
corporation, (the "Company") following the Merger and in order to assure Sub of
the transfer of the goodwill of the Company pursuant to the Merger and to
protect the trade secrets and other confidential information of the Company.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company hereby agrees with you as follows:
1. The effectiveness of this Letter Agreement is contingent upon the
closing of the Merger. In the event the Merger is not consummated, this Letter
Agreement will be of no force or effect.
2. Section 2 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
Term. Unless sooner terminated in accordance with the applicable
provisions of this Agreement, your employment hereunder shall be for the
period (including any extensions thereof, the "Employment Period")
commencing on the closing date of the Merger (the "Commencement Date") and
initially ending on the second anniversary of the date hereof. Subject to
the applicable provisions of
<PAGE>
Section 6 of this Agreement regarding earlier termination, the Employment
Period shall be extended automatically on each anniversary of the
Commencement Date, beginning with the first anniversary thereof for an
additional period of one year.
3. Section 9 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
(a) You will not during the Employment Period and for the period of
two years following date of your termination of employment with the Company
or any of its subsidiaries for any reason (the "Noncompetition Period") (i)
-----------------------
in any geographic area where the Company conducts business during the
Noncompetition Period, engage or participate in directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of
an equity or debt investment, lender or in any other manner or capacity,
including, without limitation, by the rendering of services or advice to
any person), or lend your name (or any part or variant thereof) to, any
Competing Business (as defined in below); (ii) deal, directly or
indirectly, in a competitive manner with any customers doing business with
the Company during the Noncompetition Period; (iii) solicit or employ any
officer, director or agent of the Company to become an officer, director,
or agent of you, your respective affiliates or anyone else; or (iv) engage
in or participate in, directly or indirectly, any business conducted under
any name that shall be the same as or similar to the name of the Company or
any trade name used by it. Ownership by you for investment of less than 2%
of the outstanding shares of capital stock or class of debt securities of
any corporation with one or more classes of its capital stock listed on a
national securities exchange or actively traded in the over-the-counter
market shall not constitute a breach of the foregoing covenant. You are
entering into the foregoing covenant to assure Sub of the transfer of the
goodwill of the Company, and in order to induce Sub to consummate the
purchase contemplated by the Merger Agreement.
(b) You will not at any time after the date hereof divulge, furnish
to or make accessible to anyone any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable
or not, with respect to any confidential or secret aspects of the business
of the Company (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers); provided,
--------
however, that nothing herein shall prohibit you from complying with any
-------
order or decree of any court of competent jurisdiction or governmental
entity or other requirements of law, but you will give the Company
reasonably timely notice of the receipt of any such order or decree or
legal requirement, and the foregoing provision shall not apply to (i) any
information which is or becomes generally available to the public through
no breach of this Agreement or (ii) is or becomes available to you on a
non-confidential basis from a source who is not, to your knowledge,
prohibited from disclosing the same by any legal or contractual obligation.
2
<PAGE>
(c) As used herein, the term "Competing Business" shall mean any
transportation or other business that the Company or any of its affiliates
has engaged in at any time during the Employment Period in any city or
county in any state of the United States, Canada or Mexico including,
without limitation, any business engaged in (i) intermodal marketing, (ii)
flatbed specialized hauling services, (iii) less-then-truckload common
carrier services, (iv) drayage, consolidation, deconsolidation or
distribution services, (v) contract warehousing, freight handling or
logistic services, (vi) comprehensive transportation management programs or
services to third party customers, (vii) freight consolidation and
deconsolidation, (viii) traffic management, and (ix) railroad signal
project management.
4. Section 7(b)(ii) of the Employment Agreement is hereby modified by
deleting the reference to "December 31, 2000" and substituting therefor the
language "end of the Employment Period."
5. Notwithstanding anything in this Letter Agreement to the contrary,
nothing herein shall affect the validity of any restrictive covenant you are
bound to pursuant to the Stock Purchase Agreement among you, Allen E. Steiner,
PMT Holdings, Inc., Interstate Consolidation, Inc., and Interstate Consolidation
Service, Inc., dated as of December 16, 1997.
Please acknowledge your agreement with this Letter Amendment by executing a
counterpart of this Letter Agreement in the appropriate space and returning it
to the Company.
Very truly yours,
PACER INTERNATIONAL, INC.
by _____________________________
Acknowledged and Agreed to
this __ day of ________
________________________________
Gary I. Goldfein
3
<PAGE>
EXHIBIT 10.4
PACIFIC MOTOR TRANSPORT COMPANY
3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
March 31, 1997
Mr. Robert L. Cross
2061 Casa Nuestra
Diablo, California 94528
Employment Agreement
--------------------
Dear Mr. Robert:
This letter sets forth the terms of your continued employment with
Pacific Motor Transport Company (the "Company").
1. Duties. On the terms and subject to the conditions contained in
------
this Agreement, you will be employed as the President of ABL-TRANS, a division
of the Company (the "Company"), and shall perform such duties and services
consistent with such position as may reasonably be assigned to you from time to
time by the Board of Directors or by the President of the Company.
2. Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the period
(including any extensions thereof, the "Employment Period") commencing on the
date hereof (the "Commencement Date") and initially ending on the second
anniversary of the date hereof. Subject to the applicable provisions of Section
8 of this Agreement regarding earlier termination, the Employment Period shall
be extended automatically one day prior to each anniversary of the Commencement
Date, beginning with the second anniversary thereof, for an additional period of
one year.
3. Time to be Devoted to Employment. During the Employment Period,
--------------------------------
you will devote your working energies, efforts, interest, abilities and time
exclusively to the business and affairs of the Company. You will not engage in
any other business or activity which, in the reasonable judgment of the Board of
Directors of the Company, would conflict or interfere with the performance of
your duties as set forth herein, whether
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 2
or not such activity is pursued for gain, profit or other pecuniary advantage.
4. Base Salary; Bonus; Benefits.
----------------------------
(a) During the Employment Period, the Company (or any of its
affiliates) shall pay you a minimum annual base salary (the "Base Salary") of
$200,000, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to the payment of regular
compensation to its executive officers. The Base Salary may be increased from
time to time in the sole discretion of the Board of Directors of the Company.
During the Employment Period, you will also be entitled to four weeks vacation
per year and such other benefits as may be made available to other executive
officers of the Company generally, including, without limitation, (i)
participation in such health, life and disability insurance programs and
retirement or savings plans as the Company may from time to time maintain in
effect and (ii) the use of a vehicle provided by the Company or an equivalent
monthly car allowance in accordance with the Company's policy with respect to
its senior executives.
(b) In addition to the Base Salary and benefits set forth in
paragraph (a) above, you will be entitled to receive a cash incentive bonus, if
any, with respect to each fiscal year of the Company occurring during the
Employment Period, as provided in this paragraph. The bonus, if any, for each
fiscal year of the Company ending on or prior to December 31, 2001, shall be
calculated in the manner set forth on Annex A attached to this Agreement and
-------
shall be due and payable as soon as practicable, but in no event later than 30
days, following the Company's receipt from its public accountants of the audited
financial statements of the Company. If your employment with the Company is
terminated for any reason other than without "cause" pursuant to Section 8(b),
the Company will not pay you a bonus with respect to the fiscal year in which
your employment is terminated or thereafter. If your employment with the Company
is terminated without "cause" as provided in Section 8(b) below, you will be
entitled to receive that portion of the bonus payable for such fiscal year pro
rated through the date of such termination based on the number of days elapsed
through the termination date over 365 days, payable in accordance with the
second sentence of this Section 4(b). For each fiscal year ending after December
31, 2001, the amount of the bonus and the criteria therefor shall be determined
by the Board of Directors. In the event that the Company consummates any mergers
or
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 3
acquisitions (whether of assets, stock or other interests) or other
extraordinary transactions, the Board of Directors shall in good faith make such
adjustments to the targets set forth on Annex A for Operating Income (as
-------
defined on Annex A) to take into account the effects of any such acquisition
-------
or transaction.
5. Reimbursement of Expenses. During the Employment Period, the
-------------------------
Company shall reimburse you in accordance with Company policy for all reasonable
and necessary traveling expenses and other disbursements incurred by you for or
on behalf of the Company in connection with the performance of your duties
hereunder upon presentation of appropriate receipts or other documentation
therefor, in accordance with all applicable policies of the Company.
6. Options. The Company will grant you options (the "Options") to
-------
purchase shares of common stock, $.01 par value (the "Common Stock"), of the
Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan").
The Options will be evidenced by a Stock Option Agreement between you and the
Company. The Option Plan and the Stock Option Agreement will contain all of the
terms and conditions of your Options.
7. Disability or Death. If, during the Employment Period, you are
-------------------
incapacitated or disabled by accident, sickness or otherwise (hereinafter, a
"Disability") so as to render you mentally or physically incapable of
performing the services required to be performed by you under this Agreement
for an aggregate of 210 days in any period of 360 consecutive days, the
Company may, at any time thereafter, at its option, terminate your employment
under this Agreement immediately upon giving you written notice to that
effect. In the event of your death, your employment will be deemed terminated
as of the date of death.
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 4
8. Termination.
-----------
(a) The Company may terminate your employment hereunder at any time
for "cause" by giving you written notice of such termination, with reasonable
specificity of the grounds therefor. For purposes of this Section 8, "cause"
shall mean (i) willful misconduct with respect to the business and affairs of
the Company, PMT Holdings, Inc. ("PMT") or any of their respective subsidiaries,
(ii) willful neglect of your duties or the failure to follow the lawful
directions of the Board or more senior officers of the Company to whom you
report, including, without limitation, the violation of any material policy of
the Company, PMT or any of their respective subsidiaries applicable to you,
(iii) the breach of Section 6.2(h) of the Restricted Stock Agreement (as defined
below) or the material breach of any of the provisions of this Agreement or any
Related Agreement (as defined below) and if such breach is capable of being
cured, your failure to cure such breach within 30 days of receipt of written
notice thereof from the Company, (iv) the commission of a felony, (v) the
commission of an act of fraud or financial dishonesty with respect to the
Company, PMT or any of their respective subsidiaries or affiliates or (vi) any
conviction for a crime involving moral turpitude or fraud. A termination
pursuant to this Section 8(a) shall take effect immediately upon the giving of
the notice contemplated hereby. In this Agreement, the term "Related Agreements"
means (i) the Restricted Stock Issuance and Stock Purchase Agreement dated as of
the date hereof between you and PMT (the "Restricted Stock Agreement"), and (ii)
the Stockholders Agreement dated as of the date hereof among PMT, you and the
other stockholders named therein.
(b) The Company may terminate your employment hereunder at any time
without "cause" by giving you written notice of such termination, which
termination shall be effective as of the date set forth in such notice, provided
that such date shall not be earlier than the date of the notice. You will be
employed by the Company at a facility located within a 50 mile radius of Diablo,
California. The Company may not require you to relocate from this location
unless the Company moves all or substantially all of the ABL-TRANS division, in
which case you may be required by the Company to work at such new location.
9. Effect of Termination.
---------------------
(a) Upon the effective date of a termination of your employment
under this Agreement for any reason other than a termination without cause
pursuant to Section 8(b), neither you nor your beneficiaries or estate shall
have any further rights under this Agreement or any claims against the Company
or any of its subsidiaries or affiliates arising out of this Agreement, except
the right to receive, within 30 days after the effective date of such
termination:
(i) the unpaid portion of the Base Salary provided for in
Section 4, computed on a pro rata basis to the effective date of such
--- ----
termination:
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 5
(ii) reimbursement for any expenses for which you shall not
have theretofore been reimbursed, as provided in Section 5; and
(iii) the unpaid portion of any amounts earned by you prior
to the effective date of such termination pursuant to any benefit program in
which you participated during the Employment Period; provided, however, you
-------- -------
shall not be entitled to receive any benefits under any benefit program that
have accrued during any period if the terms of such program require that the
beneficiary be employed by the Company as of the end of such period.
(b) Upon termination of your employment under this Agreement
pursuant to Section 8(b), neither you nor your beneficiaries or estate shall
have any further rights under this Agreement or any claims against the Company,
PMT or any of their respective subsidiaries or affiliates arising out of this
Agreement, except the right to receive, within 30 days after the effective date
of such termination, in the case of amounts due pursuant to clause (i) below,
and at such other times as provided in clause (ii) and (iii) below in the case
of amounts due thereunder:
(i) the payments, if any, referred to in Section 9(a) above,
to the extent not covered by clause (ii) and (iii) of this Section 9(b);
(ii) the right to continue to receive the Base Salary for a
period equal to the greater of (A) the number of months remaining in the
Employment Period on the effective date of termination or (B) twelve months, in
either case commencing on the first month following the effective date of such
termination, payable during such period in such manner as the Base Salary is
payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your
beneficiaries or estate) receive or are entitled to receive as salary or other
cash compensation from subsequent employment or for services rendered during
such period, up to a maximum of 50% of all amounts due to you under this Section
9(b)(ii). In order to carry out the intent of the immediately preceding
sentence, you agree, for yourself and your beneficiaries or estate, to provide
the Company with such information as the Company may reasonably request
regarding your receipt of salary and other cash compensation from subsequent
employment or for services rendered or to be rendered during or with respect to
such period; and
(iii) the right to receive any bonus payable in accordance
with Section 4(b) with respect to the fiscal year in which such termination
occurs.
Notwithstanding anything in this Agreement to the contrary, your
beneficiaries or estate will be entitled to continue to receive all payments
specified in this Section 9(b) if you die after the date of a termination
without "cause."
10. Disclosure of Information.
-------------------------
(a) From and after the date hereof, you shall not at any time use
or disclose to any person or entity (other than any officer, director, employee,
affiliate or representative of the Company), except as required in connection
with the performance of your duties under and in compliance with this Agreement
and as required by law and judicial process, any Confidential Information (as
hereinafter defined) heretofore acquired or acquired during the Employment
Period for any reason or purpose whatsoever, nor shall you make use of any of
the
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 6
Confidential Information for your own purposes or for the benefit of any
person or entity except the Company or any subsidiary thereof.
(b) For purposes of this Agreement, "Confidential Information"
shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the
Company and its subsidiaries and (ii) all other information of a proprietary or
confidential nature relating to the Company or any subsidiary thereof, or the
business or assets of the Company or any such subsidiary, including, without
limitation, books, records, agent and independent contractor lists and related
information, customer lists and related information, vendor lists and related
information, supplier lists and related information, distribution channels,
pricing information, cost information, marketing plans, strategies, forecasts,
financial statements, budgets and projections, other than (i) information which
is generally available to the public on the date hereof, or which becomes
generally available to the public after the date hereof without action by you or
(ii) information which you receive from a third party who does not have any
independent obligation to the Company to keep such information confidential.
(c) As used herein, the term "Intellectual Property Rights" means
all industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
applications, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes and formulae,
inventions, development tools, marketing materials, instructions, confidential
information, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
11. Noncompetition Covenant.
-----------------------
(a) You acknowledge and recognize that during the Employment
Period you will be privy to Confidential Information. You further acknowledge
and recognize that the relationships with vendors, agents and customers of the
Company that you have developed prior to the date hereof and those that you will
maintain or develop during the Employment Period with the use and assistance of
the Company and its properties and assets are of special and unique value to the
Company and its affiliates and that the Company would find it extremely
difficult to
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 7
replace you. Accordingly, in consideration of the premises contained herein and
the consideration you will receive hereunder (including, without limitation, the
severance compensation described in Section 9(b)(ii), if applicable), without
the prior written consent of the Company, you shall not, at any time during the
Employment Period and the period beginning on the effective date of any
termination of your employment with the Company and its subsidiaries and ending
on the third anniversary thereof, (a) directly or indirectly engage in,
represent in any way, or be connected with, any Competing Business (as defined
below), whether such engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any Competing Business, (b)
assist others in engaging in any Competing Business in the manner described in
clause (a) above, (c) induce other employees of the Company, PMT or any of their
respective subsidiaries to terminate their employment with the Company or any of
their respective subsidiaries or to engage in any Competing Business or (d)
induce any customer, vendor or agent or any other person or entity with which
the Company or any subsidiary or affiliate thereof has a business relationship,
contractual or otherwise, to terminate or alter such business relationship. This
covenant is considered an integral part of this Agreement. The foregoing
restriction shall not apply to your ownership of publicly traded securities
which represent not more than 5% of the ownership interests of the issuer.
(b) You understand that the foregoing restrictions may limit your
ability to earn a livelihood in a business similar to the business of the
Company or any subsidiary or affiliate thereof, but you nevertheless believe
that you have received and will receive sufficient consideration and other
benefits as an employee of the Company and under the terms of this Agreement to
justify clearly such restrictions which, in any event (given your education,
skills and ability), you do not believe would prevent you from earning a living.
(c) As used herein, the term "Competing Business" shall mean any
business conducted in any city or county in any state of the United States which
is engaged in (A) intermodal marketing or (B) providing flatbed specialized
hauling services utilizing owner-operators or agents; provided, however, that an
entity which has separate divisions or business units, one or more of which are
engaged in a business described in clause (A) or (B) hereof, will not be deemed
a Competing Business with respect to those portions of such entity which are not
engaged in a business described in clause (A) or (B) above so long as
<PAGE>
Mr.Robert Cross
March 31, 1997
Page 8
the Employee's association with any such separate division or business unit
(fully taking into account his functions and the nature of his work at such
division or business unit) does not relate in any material respect to such
portion of such business which would be a Competing Business hereunder.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if, following the termination of your employment with the Company
and/or its subsidiaries, the Company fails to pay to you any sums due under
Section 9(b)(ii) hereof and (i) you have complied in all material respects with
all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such
failure to pay continues for a period of fifteen (15) days following receipt by
the Company of written notice thereof, the restrictions contained in this
Section 11 shall terminate and be of no further force or effect. Any termination
of the restrictions contained in this Section 11 pursuant to this subsection (d)
shall not affect the Company's obligations under this Agreement or constitute a
waiver by you of any other rights or remedies you may have against the Company
for breach of any term hereof.
12. Inventions Assignment. During the Employment Period, you shall
---------------------
promptly disclose, grant and assign to the Company for its sole use and benefit
any and all inventions, improvements, technical information and suggestions
reasonably relating to the business of the Company, PMT or any of their
respective subsidiaries (collectively, the "Inventions") which you may develop
or acquire during the Employment Period (whether or not during usual working
hours), together with all patent applications, letters patent, copyrights and
reissues thereof that may at any time be granted for or with respect to the
Inventions. In connection therewith (a) you shall, at the expense of the Company
(including a reasonable payment (based on your last per diem earnings) for the
time involved if you are not then in the Company's employ or receiving severance
payments from the Company pursuant to Section 9(b)(ii)), promptly execute and
deliver such applications, assignments, descriptions and other instruments as
may be necessary or proper in the opinion of the Company to vest title to the
Inventions and any patent applications, patents, copyrights, reissues or other
proprietary rights related thereto in the Company and to enable it to obtain and
maintain the entire right and title thereto throughout the world; and (b) you
shall render to the Company, at its expense (including a reasonable payment
(based on your last per diem earnings) for the time involved if you are not then
in the Company's employ or receiving severance payments from the Company
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 9
pursuant to Section 9(b)(ii)), reasonable assistance as it may require in the
prosecution of applications for said patents, copyrights, reissues or other
proprietary rights, in the prosecution or defense of interference's which may be
declared involving any said applications, patents, copyrights or other
proprietary rights and in any litigation in which the Company may be involved
relating to the Inventions.
13. Assistance in Litigation. At the request and expense of the
------------------------
Company (including a reasonable payment (based on your last per diem earnings)
for the time involved if you are not then in the Company's employ or receiving
severance payments from the Company pursuant to Section 9(b)(ii)) and upon
reasonable notice, you shall, at all times during and after the Employment
Period, furnish such information and assistance to the Company as it may
reasonably require in connection with any issue, claim or litigation in which
the Company may be involved. If such a request for assistance occurs after the
expiration of the Employment Period, then you will only be required to render
assistance to the Company to the extent that you can do so without materially
affecting your other business obligations.
14. Entire Agreement; Amendment and Waiver. This agreement and the
--------------------------------------
other writings referred to herein contain the entire agreement between the
parties hereto with respect to the subject matter hereof and thereof and
supersede any prior agreement between you and the Company or any predecessor of
the Company or any of their respective affiliates (including, without
limitation, that certain letter agreement dated January 29, 1997, among you, Eos
Partners, L.P., and the other parties thereto). No waiver, amendment or
modification of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto. The waiver by either party of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by such other party.
15. Notices. All notices or other communications pursuant to this
-------
Agreement shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 10
(a) if to the Company, to:
Pacific Motor Transport Company
10007 Oak Tree Court
Littleton, CO 80124
Attention: President
Telecopier: (303) 790-4685
Telephone: (303) 799-1443
with a copy to:
Eos Partners, L.P.
320 Park Avenue
22nd Floor
New York, NY 10022
Attention: Douglas R. Korn
Telecopier: (212) 832-5805
Telephone: (212) 832-5800
(b) if to you, to:
Mr. Robert L. Cross
2061 Casa Nuestra
Diablo, California 94528
Telecopier: (510) 743-8975
Telephone: (510) 743-8552
16. Headings. The section headings in this Agreement are for
--------
convenience only and shall not control or affect the meaning of any provision of
this Agreement.
17. Severability. In the event that any provision of this Agreement
------------
is determined to be partially or wholly invalid, illegal or unenforceable in any
jurisdiction, then such provision shall, as to such jurisdiction, be modified or
restricted to the extent necessary to make such provision valid, binding and
enforceable, or if such provision cannot be modified or restricted, then such
provision shall, as to such jurisdiction, be deemed to be excised from this
Agreement; provided, however, that the binding effect and enforceability of the
-------- -------
remaining provisions of this Agreement, to the extent the economic benefits
conferred upon the parties by virtue of this Agreement remain substantially
unimpaired, shall not be affected or impaired in any manner, and any such
invalidity, illegality or unenforceability with respect to such provisions shall
not
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 11
invalidate or render unenforceable such provision in any other jurisdiction.
18. Remedies. You acknowledge and understand that the provisions of
--------
this Agreement are of a special and unique nature, the loss of which cannot be
adequately compensated for in damages by an action at law, and thus, the breach
or threatened breach of the provisions of this Agreement would cause the Company
irreparable harm. You further acknowledge that in the event of a breach of any
of the covenants contained in paragraphs 10, 11, or 12, the Company shall be
entitled to immediate relief enjoining such violations in any court or before
any judicial body having jurisdiction over such a claim. All remedies hereunder
are cumulative, are in addition to any other remedies provided for by law and
may, to the extent permitted by law, be exercised concurrently or separately,
and the exercise of any one remedy shall not be deemed to be an election of such
remedy or to preclude the exercise of any other remedy.
19. Representation. You hereby represent and warrant to the Company
--------------
that (a) the execution, delivery and performance of this Agreement by you does
not breach, violate or cause a default under any agreement, contract or
instrument to which you are a party or any judgment, order or decree to which
you are subject and (b) you are not a party to or bound by any employment
agreement, consulting agreement, noncompete agreement, confidentiality agreement
or similar agreement with any other person or entity.
20. Benefits of Agreement; Assignment. The terms and provisions of
---------------------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, representatives, heirs and
estate, as applicable. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other party hereto.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counter part shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
22. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any
<PAGE>
Mr, Robert Cross
March 31, 1997
Page 12
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
<PAGE>
Mr. Robert Cross
March 31, 1997
Page 13
23. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
PACIFIC MOTOR TRANSPORT COMPANY
By:_____________________________
Name:
Title:
Accepted and agreed to:
_____________________________
[Name]
<PAGE>
ANNEX A
-------
INCENTIVE BONUS PROGRAM
-----------------------
The Company will pay a cash incentive bonus based upon the Operating
Income (as hereinafter defined) of the Company for each fiscal year set forth
below occurring during the Employment Period. The amount of the Bonus so
payable will be based on the Company's achieving Operating Income (as defined
below) targets set by the President of the Company (which will be identical for
the President of the Company and the Presidents of the Company's PACER and ABL-
TRANS divisions), but which in no event will be lower than the target amounts
set forth below (with the amount of the Bonus payable being calculated
accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income).
For purposes of this Agreement, "Operating Income" means the operating income of
the Company, determined on a consolidated basis (if applicable) and in
accordance with generally accepted accounting principles consistently applied
for the fiscal year in question, as set forth on the audited statement of income
of the Company for the fiscal year in question; provided, however, Operating
-------- -------
Income shall (x) exclude management fees, non-operating gains and losses as
determined by the Board of Directors and such other non-cash items as shall be
determined by the Board of Directors and (y) be determined after giving effect
to any bonus payable by the Company to management or employees of the Company
hereunder or otherwise.
MINIMUM OPERATING INCOME TARGETS
AND CORRESPONDING BONUS CALCULATION
FISCAL YEAR 1997
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
------------------------- ----------------------------
<S> <C>
less than $3,050,000 $ 0
equal to or greater than $35,000
$3,050,000 but less than
$3,150,000
equal to or greater than $41,000
$3,150,000 but less than
$3,250,000
equal to or greater than $47,000
$3,250,000 but less than
$3,350,000
equal to or greater than $53,000
$3,350,000 but less than
$3,450,000
equal to or greater than $59,000
$3,450,000 but less than
$3,550,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $65,000
$3,550,000 but less than
$3,650,000
equal to or greater than $71,000
$3,650,000 but less than
$3,750,000
equal to or greater than $77,000
$3,750,000 but less than
$3,850,000
equal to or greater than $83,000
$3,850,000
</TABLE>
FISCAL YEAR 1998
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
---------------------- ----------------------------
<S> <C>
less than $3,288,400 $ 0
equal to or greater than $35,000
$3,288,400 but less than
$3,388,400
equal to or greater than $41,000
$3,388,400 but less than
$3,488,400
equal to or greater than $47,000
$3,488,400 but less than
$3,588,400
equal to or greater than $53,000
$3,588,400 but less than
$3,688,400
equal to or greater than $59,000
$3,688,400 but less than
$3,788,400
equal to or greater than $65,000
$3,788,400 but less than
$3,888,400
equal to or greater than $71,000
$3,888,400 but less than
$3,988,400
equal to or greater than $77,000
$3,988,400 but less than
$4,088,400
equal to or greater than $83,000
$4,088,400
</TABLE>
<PAGE>
FISCAL YEAR 1999
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ---------------------------
<S> <C>
less than $3,561,200 $ 0
equal to or greater than $35,000
$3,561,200 but less than
$3,661,200
equal to or greater than $41,000
$3,661,200 but less than
$3,761,200
equal to or greater than $47,000
$3,761,200 but less than
$3,861,200
equal to or greater than $53,000
$3,861,200 but less than
$3,961,200
equal to or greater than $59,000
$3,961,200 but less than
$4,061,200
equal to or greater than $65,000
$4,061,200 but less than
$4,161,200
equal to or greater than $71,000
$4,161,200 but less than
$4,261,200
equal to or greater than $77,000
$4,261,200 but less than
$4,361,200
equal to or greater than $83,000
$4,361,200
</TABLE>
FISCAL YEAR 2000
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $3,906,100 $ 0
equal to or greater than $35,000
$3,906,100 but less than
$4,006,100
equal to or greater than $41,000
$4,006,100 but less than
$4,106,100
equal to or greater than $47,000
$4,106,100 but less than
$4,206,100
equal to or greater than $53,000
$4,206,100 but less than
$4,306,100
</TABLE>
<PAGE>
<TABLE>
<S> <C>
equal to or greater than $59,000
$4,306,100 but less than
$4,406,100
equal to or greater than $65,000
$4,406,100 but less than
$4,506,100
equal to or greater than $71,000
$4,506,100 but less than
$4,606,100
equal to or greater than $77,000
$4,606,100 but less than
$4,706,100
equal to or greater than $83,000
$4,706,100
</TABLE>
FISCAL YEAR 2001
----------------
<TABLE>
<CAPTION>
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
<S> <C>
less than $4,152,800 $ 0
equal to or greater than $35,000
$4,152,800 but less than
$4,252,800
equal to or greater than $41,000
$4,252,800 but less than
$4,352,800
equal to or greater than $47,000
$4,352,800 but less than
$4,452,800
equal to or greater than $53,000
$4,452,800 but less than
$4,552,800
equal to or greater than $59,000
$4,552,800 but less than
$4,652,800
equal to or greater than $65,000
$4,652,800 but less than
$4,752,800
equal to or greater than $71,000
$4,752,800 but less than
$4,852,800
equal to or greater than $77,000
$4,852,800 but less than
$4,952,800
equal to or greater than $83,000
$4,952,800
</TABLE>
<PAGE>
PACER INTERNATIONAL, INC.
May 28, 1999
Robert L. Cross
2061 Casa Nuestra
Diablo, CA 94528
Re: Amendment to Employment Agreement
---------------------------------
Dear Robert:
Reference is made to the Employment Agreement, dated March 31, 1997, (the
"Employment Agreement") between Pacific Motor Transport Company and you. This
letter amendment (the "Letter Amendment") sets forth our agreement with respect
to certain amendments to the Employment Agreement in connection with the merger
(the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer
International, Inc., a Delaware corporation, Mile High Acquisition Corp., a
Delaware corporation ("Sub") and the shareholders of Pacer International, Inc.,
dated February 22, (the "Merger Agreement") for the purposes of assuring your
continued employment with Pacer International, Inc., a Tennessee corporation,
(the "Company") following the Merger and in order to assure Sub of the transfer
of the goodwill of the Company pursuant to the Merger and to protect the trade
secrets and other confidential information of the Company.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company hereby agrees with you as follows:
1. The effectiveness of this Letter Agreement is contingent upon the
closing of the Merger. In the event the Merger is not consummated, this Letter
Agreement will be of no force or effect.
2. Section 2 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the
period (including any extensions thereof, the "Employment Period")
commencing on the closing date of the Merger (the "Commencement Date") and
initially ending on the second anniversary of the date hereof. Subject to
the applicable provisions of Section 7 of this Agreement regarding earlier
termination, the Employment Period
<PAGE>
shall be extended automatically on each anniversary of the Commencement
Date, beginning with the first anniversary thereof for an additional period
of one year.
3. Section 9 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
(a) You will not during the Employment Period and for the period of
three years following date of your termination of employment with the
Company or any of its subsidiaries for any reason (the "Noncompetition
---------------
Period") (i) in any geographic area where the Company conducts business
-------
during the Noncompetition Period, engage or participate in directly or
indirectly (whether as an officer, director, employee, partner, consultant,
holder of an equity or debt investment, lender or in any other manner or
capacity, including, without limitation, by the rendering of services or
advice to any person), or lend your name (or any part or variant thereof)
to, any Competing Business (as defined in below); (ii) deal, directly or
indirectly, in a competitive manner with any customers doing business with
the Company during the Noncompetition Period; (iii) solicit or employ any
officer, director or agent of the Company to become an officer, director,
or agent of you, your respective affiliates or anyone else; or (iv) engage
in or participate in, directly or indirectly, any business conducted under
any name that shall be the same as or similar to the name of the Company or
any trade name used by it. Ownership by you for investment of less than 2%
of the outstanding shares of capital stock or class of debt securities of
any corporation with one or more classes of its capital stock listed on a
national securities exchange or actively traded in the over-the-counter
market shall not constitute a breach of the foregoing covenant. You are
entering into the foregoing covenant to assure Sub of the transfer of the
goodwill of the Company, and in order to induce Sub to consummate the
purchase contemplated by the Merger Agreement.
(b) You will not at any time after the date hereof divulge, furnish
to or make accessible to anyone any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable
or not, with respect to any confidential or secret aspects of the business
of the Company (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers); provided,
--------
however, that nothing herein shall prohibit you from complying with any
-------
order or decree of any court of competent jurisdiction or governmental
entity or other requirements of law, but you will give the Company
reasonably timely notice of the receipt of any such order or decree or
legal requirement, and the foregoing provision shall not apply to (i) any
information which is or becomes generally available to the public through
no breach of this Agreement or (ii) is or becomes available to you on a
non-confidential basis from a source who is not, to your knowledge,
prohibited from disclosing the same by any legal or contractual obligation.
2
<PAGE>
(c) As used herein, the term "Competing Business" shall mean any
transportation or other business that the Company or any of its affiliates
has engaged in at any time during the Employment Period in any city or
county in any state of the United States, Canada or Mexico including,
without limitation, any business engaged in (i) intermodal marketing, (ii)
flatbed specialized hauling services, (iii) less-then-truckload common
carrier services, (iv) drayage, consolidation, deconsolidation or
distribution services, (v) contract warehousing, freight handling or
logistic services, (vi) comprehensive transportation management programs or
services to third party customers, (vii) freight consolidation and
deconsolidation, (viii) traffic management, and (ix) railroad signal
project management.
Please acknowledge your agreement with this Letter Amendment by executing a
counterpart of this Letter Agreement in the appropriate space and returning it
to the Company.
Very truly yours,
PACER INTERNATIONAL, INC.
by _____________________________
Acknowledged and Agreed to
this __ day of ________
________________________________
Robert L. Cross
3
<PAGE>
EXHIBIT 10.5
PMT HOLDINGS, INC.
3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
December __16, 1997
Mr. Allen E. Steiner
1537 Amalfi Drive
Pacific Palisades, CA 90272-2754
Employment Agreement
--------------------
Dear Allen:
This letter sets forth the terms of your employment with PMT Holdings,
Inc. ("Holdings"), Interstate Consolidation, Inc. ("ICI"), and Interstate
-------- ---
Consolidation Service, Inc. ("ICSI"). ICI and ICSI (together, "Interstate") are
----
wholly owned subsidiaries of Holdings. Holdings, ICI and ICSI are each herein
referred to as a "Company" and collectively as the "Companies".
------- ---------
Section 1. Duties. On the terms and subject to the conditions
------
contained in this Agreement, you will be employed as an Executive Vice President
of each of Holdings, ICI and ICSI (and one or more of Holdings' other
subsidiaries as the Board of Directors of Holdings may reasonably determine),
and will have such duties and responsibilities consistent with such positions as
may reasonably be assigned to you from time to time by the President, the
Chairman of the Board or the Board of Directors of each Company, as applicable,
regarding the following areas: general corporate administration, including some
or all of the following: human resources, employment benefits, finance,
management information systems, contracts and insurance (provided, however, that
-------- -------
you will not be required to relocate your principal office to any location
outside a 50 mile radius from your current principal office located at 5800 East
Sheila Street, Los Angeles, California).
Section 2. Term. Unless sooner terminated in accordance with the
----
applicable provisions of this Agreement, your employment hereunder shall be for
the period (the "Employment Period") commencing on the date hereof (the
-----------------
"Commencement Date") and ending on December 31, 2000.
-----------------
Section 3. Time to be Devoted to Employment. During the Employment
--------------------------------
Period, you will devote substantially all of your working energies, efforts,
interest, abilities and time during normal business hours exclusively to the
business and affairs of the Companies (except for reasonable time devoted to the
procedures contemplated by Article III of the Purchase Agreement (as defined in
Section 9(a) below) on your own behalf). You will not engage in any other
business or activity which, in the
<PAGE>
reasonable judgment of the Board, the Chairman or the President of each Company,
as applicable, would conflict or interfere, in any material respect, with the
performance of your duties as set forth herein, whether or not such activity is
pursued for gain, profit or other pecuniary advantage.
Section 4. Base Salary; Bonus; Benefits.
----------------------------
(a) During the Employment Period, you will be entitled to a
minimum annual base salary (the "Base Salary") of $220,000 payable by Interstate
in such installments (but not less often than bi-weekly) as is generally the
policy of the Companies with respect to the payment of regular compensation to
its executive officers. The Base Salary may be increased from time to time in
the sole discretion of Holdings' Board. During the Employment Period, you will
also be entitled to the benefits set forth in Part I on Schedule 4(a) attached
hereto, which include four weeks vacation per year and such other benefits as
may from time to time be made available to other executive officers of the
Companies generally, including, without limitation, (i) participation in such
health, life and disability insurance programs and retirement or savings plans
as the Companies may from time to time maintain in effect (provided, however,
-------- -------
that, during the period ending on the first anniversary of the date hereof (or
April 1, 1999, in the case of group health plans), the Companies will not amend
or modify, in any manner that would have a materially adverse effect on the
benefits made available thereunder, any of the employee benefit plans and
programs required to be maintained by Section 7.6 of the Purchase Agreement set
forth in Part II on Schedule 4(a) attached hereto that are maintained by ICI and
------- -------------
ICSI; provided further however, that you may elect to not be covered by the
-------- ------- -------
Companies' benefit plans by so notifying the Companies, and the Companies shall
pay you an amount equal to the benefits cost savings realized by the Company, as
reasonably determined by the Companies and you in consultation with the
Companies' benefits consultants), (ii) participation in such stock option plans
of Holdings as may be adopted from time to time for the executive officers of
the Companies on terms determined by the Board of Holdings and (iii) during the
Employment Period and for a period of six years thereafter, with respect to your
position as a director or officer (as the case may be), directors' and officers'
liability insurance. Part III of Schedule 4(a) attached hereto sets forth the
benefits made available on the date hereof to the other executive officers of
Holdings and its subsidiaries generally.
(b) In addition to the Base Salary and benefits set forth in
paragraph (a) above, during the Employment Period you will be entitled to
receive a bonus, if any, with respect to each full calendar year occurring
during the Employment Period, commencing with the calendar year ending December
31, 1998, such bonus to be paid in a lump sum following the end of the calendar
year with respect to which such bonus is payable (such payment to be made at the
same time performance bonuses are paid to the other senior managers of Holdings
and its subsidiaries). If your employment with the Companies is terminated for
any reason other than without "cause" pursuant to Section 8(b), the Companies
will not pay you a bonus with respect to the calendar year in which your
employment is terminated or thereafter. If your employment with the Companies is
terminated without "cause" pursuant to Section 6(b) below, you will be entitled
to receive that portion of the bonus payable for the calendar year during which
such termination occurs pro rated through the date of such termination based on
the
<PAGE>
number of days elapsed through the termination date over 365 days, payable in
accordance with the first sentence of this Section 4(b). The bonus payable for
each such calendar year shall be subject to and determined based on the
achievement by Holdings and its subsidiaries of specified performance targets
applicable to the other senior managers of Holdings and its subsidiaries, such
bonus to range from $35,000 upon the achievement of the minimum specified
targets to $90,000 upon the achievement of the maximum specified targets. The
minimum specified target for the year ending December 31, 1998, is $9.0 million
in Operating Income (as defined in Schedule 4(b)) and the maximum specified
target for the year ending December 31, 1998, is $9.9 million in Operating
Income (as defined in Schedule 4(b)), subject in each case to the adjustment of
such targets pursuant to Schedule 4(b).
-------------
Section 5. Reimbursement of Expenses. During the Employment Period,
-------------------------
the Companies shall reimburse you in accordance with their policies for all
reasonable and necessary traveling expenses and other disbursements incurred by
you for or on behalf of the Companies in connection with the performance of your
duties hereunder upon presentation of appropriate receipts or other
documentation therefor, in accordance with all applicable policies of the
Companies.
Section 6. Termination.
-----------
(a) Holdings may terminate your employment hereunder at any
time for "cause" by giving you written notice of such termination, with
reasonable specificity of the grounds therefor. For purposes of this Section 6,
"cause" shall mean any of the following (whether occurring before or after the
date hereof): (i) willful misconduct with respect to the business and affairs of
the Companies or any of their respective subsidiaries, (ii) willful neglect of
your duties or the failure to follow the lawful and reasonable directions of the
Board, the Chairman or the President of each Company, including, without
limitation, the violation of any material written policy (or oral policy of
which you are aware) of the Companies or any of their respective subsidiaries
applicable to you, and, if such neglect or failure is capable of being cured,
your failure to cure the same as soon as practicable, but in any event within 30
days of receipt of written notice thereof from Holdings, (iii) the material
breach of any of the provisions of this Agreement), and, if such breach is
capable of being cured, your failure to cure such breach as soon as practicable,
but in any event within 30 days of receipt of written notice thereof from
Holdings, (iv) the commission of a felony, (v) the commission of an act of fraud
or financial dishonesty with respect to any of the Companies or their respective
subsidiaries or affiliates or (vi) any conviction for a crime involving moral
turpitude or fraud. A termination pursuant to this Section 6(a) shall take
effect immediately upon the giving of notice contemplated hereby (subject to any
applicable cure period).
(b) Holdings may terminate your employment hereunder at any
time without "cause" by giving you written notice of such termination, which
termination shall be effective as of the date set forth in such notice, provided
that such date shall not be earlier than the date of such notice (provided that
you shall be afforded a reasonable period of time after such termination to
remove your personal effects from the
<PAGE>
Companies' premises). Any material breach of Section 1 of this Agreement by any
of the Companies that remains uncured for more than 30 days after your delivery
to the Companies of written notice of such breach shall be deemed to be a
termination without "cause" for purposes of this Agreement. For purposes of the
immediately preceding sentence, a substantial reduction of your duties,
responsibilities and status set forth in Section 1 of this Agreement shall be
deemed to be a "material breach" of such Section 1. In connection with the
foregoing, however, you acknowledge that the Companies intend to and may hire a
Chief Financial Officer.
(c) If, during the Employment Period, you are incapacitated or
disabled by accident, sickness or otherwise so as to render you mentally or
physically incapable of performing substantially all of the services required to
be performed by you under this Agreement for an aggregate of 210 days in any
period of 360 consecutive days (hereinafter, a "Disability"), the Companies may,
at any time thereafter, at their option, terminate your employment under this
Agreement immediately upon giving you written notice to that effect. In the
event of your death, your employment will be deemed terminated as of the date of
your death.
Section 7. Effect of Termination.
---------------------
(a) Upon the effective date of a termination of your
employment under this Agreement for any reason other than a termination without
cause pursuant to Section 6(b), neither you nor your beneficiaries or estate
shall have any further rights under this Agreement or any claims against the
Companies or any of their respective subsidiaries or affiliates arising out of
this Agreement, except the right to receive the following as soon as reasonably
practicable following the effective date of such termination (but in any event
within the applicable time period (if any) mandated by applicable law):
(i) the unpaid portion of the Base Salary payable
pursuant to Section 4, computed on a pro rata basis to the effective date of
--- ----
such termination;
(ii) reimbursement for any expenses for which you shall
not have theretofore been reimbursed, as provided in Section 5; and
(iii) the unpaid portion of any amounts earned by you
prior to the effective date of such termination pursuant to any benefit program
in which you participated during the Employment Period; provided, however, that
-------- -------
you shall not be entitled to receive any benefits under any benefit program that
have accrued during any period if the terms of such program require that the
beneficiary be employed by a Company as of the end of such period.
(b) Upon termination of your employment under this Agreement
pursuant to Section 6(b), neither you nor your beneficiaries or estate shall
have any further rights under this Agreement or any claims against the Companies
or any of their respective subsidiaries or affiliates arising out of this
Agreement, except the right
<PAGE>
to receive the following as soon as reasonably practicable following the
effective date of such termination (but in any event within the applicable time
period (if any) mandated by applicable law in the case of amounts due pursuant
to clause (i) below, and at such other times as provided in clauses (ii) and
(iii) below in the case of amounts due thereunder):
(i) the payments, if any, referred to in Section 7(a)
above, to the extent not covered by clause (ii) of this Section 7(b);
(ii) the right to continue to receive the Base Salary
from the effective date of such termination until December 31, 2000, payable
during such period in such manner as the Base Salary is payable pursuant to
Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or
estate) receive or are entitled to receive as salary or other cash compensation
from your subsequent employment or for services rendered by you for one or more
other parties (other than such services that are rendered by you in the
aggregate for less than 20 hours per calendar week and less than 260 hours per
calendar quarter) during such period (other than such compensation earned by you
from a business controlled by you), up to a maximum of 50% of all amounts due to
you under this Section 7(b)(ii) (in order to carry out the intent of the
immediately preceding sentence, you agree, for yourself and your beneficiaries
or estate, to provide the Companies with such information as the Companies may
reasonably request regarding your receipt of salary and other cash compensation
from subsequent employment or for services rendered or to be rendered during or
with respect to such period); and
(iii) the right to receive any bonus payable in
accordance with Section 4(b) with respect to the fiscal year in which such
termination occurs.
Notwithstanding anything contained in this Agreement to the contrary, your
beneficiaries or estate will be entitled to continue to receive all payments
specified in this Section 7(b) if you die after the date of a termination
without "cause."
Section 8. Disclosure of Information.
-------------------------
(a) From and after the date hereof, you shall not at any time
use or disclose to any person or entity (other than any officer, director,
employee, affiliate or representative of the Companies), except as required in
connection with the performance of your duties under and in compliance with this
Agreement and as required by law and judicial process, any Confidential
Information (as hereinafter defined) heretofore acquired or acquired during the
Employment Period for any reason or purpose whatsoever, nor shall you make use
of any of the Confidential Information for your own purposes or for the benefit
of any person or entity except the Companies or their respective subsidiaries.
(b) For purposes of this Agreement, "Confidential Information"
shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the
Companies and their respective subsidiaries and affiliates and (ii) all other
information of a proprietary or confidential nature relating to the Companies or
their respective
<PAGE>
subsidiaries and affiliates, or the business or assets of the Companies or their
respective subsidiaries and affiliates, including, without limitation, books,
records, agent and independent contractor lists and related information,
customer lists and related information, vendor lists and related information,
supplier lists and related information, distribution channels, pricing
information, cost information, marketing plans, strategies, forecasts, financial
statements, budgets and projections, other than, with respect to both clauses
(i) and (ii), (x) information which is generally available to the public on the
date hereof, or which becomes generally available to the public after the date
hereof without action by you, or (y) information which you receive from a third
party who does not have any independent obligation to any of the Companies or
their respective subsidiaries or affiliates to keep such information
confidential.
(c) As used herein, the term "Intellectual Property Rights"
means all industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyrights,
copyright applications, know-how, certificates of public convenience and
necessity, franchises, licenses, trade secrets, proprietary processes and
formulae, inventions, development tools, marketing materials, instructions,
confidential information, trade dress, logos and designs and all documentation
and media constituting, describing or relating to the foregoing, including,
without limitation, manuals, memoranda and records.
Section 9. Noncompetition Covenant.
-----------------------
(a) You acknowledge and recognize that during the Employment
Period you will be privy to Confidential Information. You further acknowledge
and recognize that the relationships with vendors, agents and customers of the
Companies and their respective subsidiaries that you have developed prior to the
date hereof and those that you will maintain or develop during the Employment
Period with the use and assistance of the Companies and their respective
subsidiaries, and their respective properties and assets, are of special and
unique value to the Companies and their affiliates and that the Companies would
find it extremely difficult to replace you. In addition, you acknowledge and
agree that this Agreement is being executed and delivered in connection with,
and as a mutual condition to the respective obligations of the parties at the
closing on the date hereof under, the Stock Purchase Agreement dated as of the
date hereof (the "Purchase Agreement") between each of the Companies, you and
the other seller thereunder; provided, however, that the Companies agree that a
-------- -------
breach by you of this Section 9 shall in no event constitute a breach under the
Purchase Agreement (it being acknowledged by you, however, that this proviso
shall in no way limit or affect the separate and independent provisions of
Section 7.4 of the Purchase Agreement). As a material inducement to Holdings to
enter into and perform its obligations under the Purchase Agreement, and in
consideration of the payments and other benefits (including the further
experience and expertise to be gained during your employment hereunder) to be
received by you under the Purchase Agreement and this Agreement (including,
without limitation, the severance compensation described in Section 7(b)(ii), if
applicable), you shall not, without the prior written consent of the Companies,
at any time during the Employment Period and the period beginning on the
effective date of any termination of your employment with the Companies and
their respective subsidiaries or
<PAGE>
affiliates and ending on the later of (i) the second anniversary thereof and
(ii) the fifth anniversary of the Commencement Date, (a) directly or indirectly
engage in, represent in any way, or be connected with, any Competing Business
(as defined below), whether such engagement shall be as an officer, director,
owner, employee, partner, affiliate or other participant in any Competing
Business, (b) assist others in engaging in any Competing Business in any manner
described in clause (a) above, (c) induce other employees of the Companies or
any of their respective subsidiaries or affiliates to terminate their employment
with any of the Companies or any of their respective subsidiaries or affiliates
or to engage in any Competing Business or in any manner described in clause (a)
above or (d) induce any customer, vendor or agent or any other person or entity
with which any of the Companies or their respective subsidiaries or affiliates
has a business relationship to terminate or alter such business relationship.
This covenant is considered an integral part of this Agreement. The foregoing
restriction shall not apply to your ownership of publicly traded securities
which represent not more than 5% of the ownership interests of the issuer.
(b) You understand that the foregoing restrictions may limit
your ability to earn a livelihood in a business similar to the business of any
of the Companies or any subsidiary or affiliate thereof, but you nevertheless
believe that you have received and will receive sufficient consideration and
other benefits under the Purchase Agreement and as an employee of the Companies
and under the terms of this Agreement to justify clearly such restrictions
which, in any event (given your education, skills and ability), you do not
believe would prevent you from earning a living.
(c) As used herein, the term "Competing Business" shall mean
------------------
any business engaged in providing any of the following transportation services
to third party customers:
(i) intermodal marketing or transportation services in
any city or county in any state or province located in the continental United
States, Canada or Mexico;
(ii) less-then-truckload common carrier services in any
city or county in any state or province located in the continental United
States, Canada or Mexico;
(iii) intra-state trucking of truckload or less-than-
truckload freight in any city or county located in the state of California;
(iv) drayage, consolidation, deconsolidation or
distribution services in any city or county in any state or province located in
the continental United States, Canada or Mexico where any of the Companies
conducts business or provides any drayage, consolidation, deconsolidation or
distribution services at the time of, or where there are fixed plans any of the
Companies to conduct business or provide any drayage, consolidation,
deconsolidation or distribution services at any time within 12 months after, the
termination of your employment with the Companies; or
<PAGE>
(v) contract warehousing, freight handling or logistics
services in any city or county in any state or province located in the
continental United States, Canada or Mexico where any of the Companies conducts
business or provides such services at the time of, or where there are fixed
plans for any of the Companies to conduct business or provide such services at
any time within 12 months after, the termination of your employment with the
Companies.
Anything contained in the immediately preceding sentence to the contrary
notwithstanding,
A. any entity which has separate divisions or
business units, one or more of which are engaged in a business
described in the immediately preceding sentence, will not be deemed to
be a Competing Business with respect to those separate divisions or
business units of such entity that are not engaged in a business
described in the immediately preceding sentence so long as your
association with any such separate division or business unit (fully
taking into account your functions and the nature of your work at such
division or business unit) does not (1) involve existing customers of
any of the Companies at the time of the termination of your employment
with the Companies or former customers of any of the Companies at any
time during the 12 months preceding such termination or (2) relate in
any material respect to such portion of such business which would be a
Competing Business hereunder;
B. the provision of consulting services to a
direct shipper who is not a customer of any of the Companies at the
time of the termination of your employment with the Companies, or a
former customer of any of the Companies at any time during the 12
months preceding such termination, shall not be deemed to be "engaging
in a Competing Business" for purposes of this SECTION 9; and
---------
C. the provision of any drayage, consolidation,
deconsolidation, distribution, contract warehousing, freight handling
or logistics services in any location described in clause (iv) or (v)
of the immediately preceding sentence shall only be deemed to be a
"Competing Business" if (1) you had direct managerial authority at any
Company (or any of its separate divisions or business units), or
otherwise had ongoing contact with the customers of such Company (or
division or business unit), that was engaged in providing any
drayage, consolidation, deconsolidation, distribution, contract
warehousing, freight handling or logistics services at the time of (or
at any time within the 12 months prior to) the termination of your
employment with the Companies or where such Company (or such division
or business unit) had fixed plans at the time of such termination to
provide any drayage, consolidation, deconsolidation, distribution,
contract warehousing, freight handling or logistics services at any
time within 12 months after such termination, or (2) any drayage,
consolidation, deconsolidation, distribution, contract warehousing,
freight
<PAGE>
handling or logistics services are being provided to any Person who
was a customer of the Company at the time of the termination of your
employment with the Companies or at any time during the 12 months
prior to such termination.
Section 10. As used herein, the term "Competing Business" shall mean
------------------
any business engaged in providing any of the following transportation services
to third party customers: (i) intermodal marketing or transportation services
in any city or county in any state or province located in the continental United
States, Canada or Mexico; (ii) less-than-truckload common carrier services in
any city or county in any state or province located in the continental United
States, Canada or Mexico; (iii) intra-state trucking of truckload or less-than-
truckload freight in any city or county located in the state of California; (iv)
drayage, consolidation, deconsolidation or distribution services in any city or
county in any state or province located in the continental United States, Canada
or Mexico where the Business is conducted or provides such services, or where
there are fixed plans for the Business to be conducted or to provide such
services within 12 months of the time in question; or (v) contract warehousing,
freight handling or logistics services in any city or county in any state or
province located in the continental United States, Canada or Mexico where the
Business is conducted or provides such services, or where there are fixed plans
for the Business to be conducted or to provide such services within 12 months of
the time in question; provided, however, that (A) any entity which has separate
-------- -------
divisions or business units, one or more of which are engaged in a business
described above in this sentence, will not be deemed a Competing Business with
respect to those portions of such entity which are not engaged in a business
described above in this sentence so long as a Seller's association with any such
separate division or business unit (fully taking into account his functions and
the nature of his work at such division or business unit) does not hereunder;
and (B) providing consulting services to direct shippers who are not customers
of the Companies at the time in question shall not be deemed to be "engaging in
a Competing Business" for purposes of this Section. For purposes of the
foregoing clauses (iv) and(v), the services described therein shall only be
deemed to be a "Competing Business" if you had direct managerial authority at
the Company or its division that was providing such services to customers at the
time in question or which provided such services to persons who were customers
of the Company or such division at any time in the preceding twelve months, or
if you otherwise had ongoing contact with such customers or other persons.
Inventions Assignment. During the Employment Period, you shall promptly
- ---------------------
disclose, grant and assign to the Companies for their sole use and benefit any
and all inventions, improvements, technical information and suggestions
reasonably relating to the business of the Companies or any of their respective
subsidiaries or affiliates (collectively, the "Inventions") which you may
develop or acquire during the Employment Period (whether or not during usual
working hours), together with all patent applications, letters patent,
copyrights and reissues thereof that may at any time be granted for or with
respect to the Inventions. In connection therewith (a) you shall, at the
expense of the Companies (including a reasonable payment (based on your last per
diem earnings) for the time involved if you are not then in the employ of any of
the Companies or receiving severance payments from the Companies pursuant to
Section 7(b)(ii)), promptly execute and deliver such applications, assignments,
descriptions and other instruments as may be
<PAGE>
necessary or proper in the opinion of the Companies to vest title to the
Inventions and any patent applications, patents, copyrights, reissues or other
proprietary rights related thereto in the Companies and to enable them to obtain
and maintain the entire right and title thereto throughout the world; and (b)
you shall render to the Companies, at their expense (including a reasonable
payment (based on your last per diem earnings) for the time involved if you are
not then in the employ of any of the Companies or receiving severance payments
from the Companies pursuant to Section 7(b)(ii)), such reasonable assistance as
they may require in the prosecution of applications for said patents,
copyrights, reissues or other proprietary rights, in the prosecution or defense
of interferences which may be declared involving any said applications, patents,
copyrights or other proprietary rights and in any litigation in which any of the
Companies may be involved relating to the Inventions.
Section 11. Assistance in Litigation.
------------------------
(a) At all times during the Employment Period, and thereafter
upon reasonable notice from the Board or the Chairman of Holdings you shall
furnish such information and assistance to the Companies as any of them may
reasonably require in connection with the actions entitled Irwin Albillo et. al.
--------------------
v. Intermodal Container Service, Inc. et. al. (Case No. B0174508), and Paul
- -------------------------------------------- ----
Cardoza, et al., vs. Air Rail Truck Service-Air Cargo, et al. (Case No. BC 153
- ------------------------------------------------------------------------------
522), any other related case contemplated by the Cardoza Court's Ruling on
- --------------------------------------------------------------------------
Submitted Matter entered on October 31, 1997, or any other action, federal or
- --------------------------------------------
state, arising from the facts alleged in the Albillo case referred to above, as
any such action may beamended, modified, restated or refiled, whether by the
plaintiffs Albillo, Cardoza or one or more other independent contractor drivers
against one or more of the Companies and the Subsidiary asserting claims based
on the facts alleged in the Albillo action or the Cardoza action cited above.
------- -------
Such information and assistance shall include, but not be limited to, appearing
from time to time at the offices of the Companies or Companies' counsel for
conferences and interviews and in general providing the officers of the
Companies, the Companies and Companies' counsel with the full benefit of your
knowledge with respect to such actions. The Companies shall pay or reimburse
you for all reasonable out-of-pocket expense incurred by you in connection with
your furnishing such information and assistance upon presentation of appropriate
receipts or other documentation therefor.
(b) At all times during the Employment Period, and thereafter
upon reasonable notice from the Board or the Chairman and at the expense of the
Companies (including a reasonable payment (based on your last per diem earnings)
for the time involved if you are not then in the employ of any of the Companies
or collecting payments pursuant to Section 7(b)), you shall furnish such
information and assistance to the Companies as any of them may reasonably
require in connection with any issue, claim or litigation in which any of the
Companies may be involved (excluding the matters covered by Section 11(a)
above). Such information and assistance shall include, but not be limited to,
appearing from time to time at the offices of the Companies or Companies'
counsel for conferences and interviews and in general providing the officers of
the Companies, the Companies and Companies' counsel with the full benefit of
your knowledge with respect to such issue, claim or litigation.
<PAGE>
Section 12. Entire Agreement; Amendment and Waiver. This Agreement
--------------------------------------
embodies the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any and all
prior and contemporaneous understandings, agreements, arrangements or
representations by or among the parties, written or oral, which may relate to
the subject matter hereof in any way. Other than this Agreement, there are no
other agreements continuing in effect relating to the subject matter hereof
(except that the parties acknowledge the existence of the separate and
independent provisions contained in Section 7.4 of the Purchase Agreement). No
waiver, amendment or modification of any provision of this Agreement shall be
effective unless in writing and signed by each party hereto. The waiver by
either party of a breach of any provision of this Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by such
other party.
Section 13. Notices. All notices or other communications pursuant to
-------
this Agreement shall be in writing and shall be deemed to be sufficient if
delivered personally, telecopied, sent by nationally-recognized, overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to any Company, to:
PMT Holdings, Inc.
3746 Mt. Diablo Boulevard, Suite 100
Lafayette, CA 94549
Attention: Chairman of the Board
Telecopier: (510) 299-
Telephone: (510) 283-1938
with a copy to:
Eos Partners, L.P.
320 Park Avenue
22nd Floor
New York, NY 10022
Attention: Douglas R. Korn
Telecopier: (212) 832-5815
Telephone: (212) 832-5803
(b) if to you, to:
Mr. Allen E. Steiner
1537 Amalfi Drive
Pacific Palisades, CA 90272-2754
Telephone: (310) 459-3926
Telecopier: (310) 459-8124
<PAGE>
with copies to:
Manatt, Phelps & Phillips, LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90064
Attention: Ronald S. Barak
Telecopier: (310) 312-4224
Telephone: (310) 312-4000
Mr. Gary I. Goldfein
229 N. Clifford Avenue
Los Angeles, CA 90049
Telephone: (310) 471-2974
Telecopier: (310) 471-7438
Section 14. Headings. The section headings in this Agreement are for
--------
convenience only and shall not control or affect the meaning of any provision of
this Agreement.
Section 15. Severability. In the event that any provision of this
------------
Agreement is determined to be partially or wholly invalid, illegal or
unenforceable in any jurisdiction, then such provision shall, as to such
jurisdiction, be modified or restricted to the extent necessary to make such
provision valid, binding and enforceable, or if such provision cannot be
modified or restricted, then such provision shall, as to such jurisdiction, be
deemed to be excised from this Agreement; provided, however, that the binding
-------- ------
effect and enforceability of the remaining provisions of this Agreement, to the
extent the economic benefits conferred upon the parties by virtue of this
Agreement remain substantially unimpaired, shall not be affected or impaired in
any manner, and any such invalidity, illegality or unenforceability with respect
to such provisions shall not invalidate or render unenforceable such provision
in any other jurisdiction.
Section 16. Remedies. You acknowledge and understand that the
--------
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
thus, the breach or threatened breach of the provisions of this Agreement would
cause the Companies irreparable harm. You further acknowledge that in the
event of a breach of any of the covenants contained in paragraphs 8, 9, or 10,
the Companies shall be entitled to immediate relief enjoining such violations in
any court or before any judicial body having jurisdiction over such a claim.
All remedies hereunder are cumulative, are in addition to any other remedies
provided for by law and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one remedy shall not be
deemed to be an election of such remedy or to preclude the exercise of any other
remedy.
Section 17. Representation.
--------------
<PAGE>
(a) You hereby represent and warrant to Holdings that (i) the
execution, delivery and performance of this Agreement by you and ICI and ICSI
does not breach, violate or cause a default under any agreement, contract or
instrument to which any of you, ICI or ICSI is a party or any judgment, order or
decree to which any of you, ICI OR ICSI is subject, and (ii) none of you, ICI or
ICSI is a party to or bound by any employment agreement, consulting agreement,
noncompete agreement, confidentiality agreement or similar agreement regarding
your employment or retention with or by any other person or entity.
(b) Holdings hereby represents and warrants to you that the
execution, delivery and performance of this Agreement by Holdings does not
breach, violate or cause a default under any agreement, contract or instrument
to which Holdings is a party or any judgment, order or decree to which Holdings
is subject.
Section 18. Benefits of Agreement; Assignment. The terms and
---------------------------------
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, representatives,
heirs and estate, as applicable. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other parties hereto.
Section 19. Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
Section 20. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
Section 21. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO
APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
<PAGE>
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
PMT HOLDINGS, INC.
By:_____________________
Name:
Title:
INTERSTATE CONSOLIDATION, INC.
By:_____________________
Name:
Title:
INTERSTATE CONSOLIDATION
SERVICE, INC.
By:_____________________
Name:
Title:
Accepted and agreed to:
________________________
Allen E. Steiner
<PAGE>
SCHEDULE 4(A)
PART I
------
. One German Luxury Company Car each including gasoline, repairs, maintenance,
insurance, taxes, etc. (to be replaced not less often than once every three
years after the date of acquisition of such vehicle)
. Country Club Dues (approx. $475/mo.)
. WPO\YPO Dues (approx. $5,000/yr.)
. YPO Seminars
. Membership in Trade and Business Organizations and airline and automobile
club memberships
. Misc. Business Tools including computer links, cell phones, car phones, etc.
. Health Insurance
. Disability Pay as per standard for employees with 25 years service
. Sick Leave as per standard for employees with 25 years service
. Vacation time as per standard for employees with 25 years Service
PART II
-------
The following are the employee benefits for senior executive officers of
Holdings as of the date hereof:
Group Health Insurance
Connecticut General Life Insurance Company - Policy 2233560-01
Coverage: standard group plan
Group Term Life Insurance
Fortis Benefits Insurance Company - Policy 4009662
Coverage: $350,000
Additional Term Life Insurance
CNA/Valley Forge Life Insurance
Coverage: $700,000
Accidental Death and Dismemberment
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Short Term Disability
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Long Term Disability
<PAGE>
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Massachusetts Casualty Insurance Company
Gerry Angeli - $6,200 per month
Robert Cross - $4,750 per month
Group Dental Insurance
Fortis Benefits Insurance Company - Policy 4009662
Coverage: standard group plan
Pacific Motor Transport 401(k) Plan
Merrill Lynch
Company matching contribution: 3% of first 100% if participant's contribution
Company Automobiles
Gerry Angeli - Buick Park Avenue
Bob Cross - Buick Park Avenue
Don Orris - Car Allowance of $1,076 per month
<PAGE>
SCHEDULE 4(B)
OPERATING INCOME
----------------
For purposes of Section 4(b) of this Agreement, "Operating Income"
----------------
means, for any calendar year, the earnings before interest expense and interest
income, income taxes and amortization of goodwill and acquisition and financing
fees of Holdings and its subsidiaries, determined on a consolidated basis and in
accordance with generally accepted accounting principles consistently applied
for the calendar year in question, as set forth on the audited consolidated
statement of income of Holdings and its subsidiaries for the fiscal year in
question; provided, however, that Operating Income shall (x) exclude management
-------- -------
fees, transaction expenses, non-operating gains and losses as determined by the
Board of Directors of Holdings and such other non-cash items as shall be
determined by the Board of Directors of Holdings (provided that, with regard to
recognition of income due to customer credit balances and the reversal of prior
period accounts payable, such recognition will be made on a basis consistent
with past practice as to amount and timing of such recognition) and (y) be
determined after giving effect to any and all bonuses payable by Holdings and/or
any of its subsidiaries to management or employees of Holdings and/or any of its
subsidiaries hereunder or otherwise. In the event that Holdings and/or any of
its subsidiaries consummate any mergers or acquisitions (whether of assets,
stock or other interests) or other extraordinary transactions, the Board of
Directors of Holdings shall in good faith make such adjustments to the targets
set forth in Section 4(b) for Operating Income (as defined above) to take into
account the effects of any such acquisition or other extraordinary transaction.
<PAGE>
PACER INTERNATIONAL, INC.
May 28, 1999
Allen E. Steiner
1537 Amalfi Dr.
Pacific Palisades, CA 90272-2754
Re: Amendment to Employment Agreement
---------------------------------
Dear Allen:
Reference is made to the Employment Agreement, dated December 16, 1997,
(the "Employment Agreement") between Pacific Motor Transport Company and you.
This letter amendment (the "Letter Amendment") sets forth our agreement with
respect to certain amendments to the Employment Agreement in connection with the
merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst
Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp.,
a Delaware corporation ("Sub") and the shareholders of Pacer International,
Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring
your continued employment with Pacer International, Inc., a Tennessee
corporation, (the "Company") following the Merger and in order to assure Sub of
the transfer of the goodwill of the Company pursuant to the Merger and to
protect the trade secrets and other confidential information of the Company.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company hereby agrees with you as follows:
1. The effectiveness of this Letter Agreement is contingent upon the
closing of the Merger. In the event the Merger is not consummated, this Letter
Agreement will be of no force or effect.
2. Section 2 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the
period (including any extensions thereof, the "Employment Period")
commencing on the closing date of the Merger (the "Commencement Date") and
initially ending on the second anniversary of the date hereof. Subject to
the applicable provisions of
<PAGE>
Section 6 of this Agreement regarding earlier termination, the Employment
Period shall be extended automatically on each anniversary of the
Commencement Date, beginning with the first anniversary thereof for an
additional period of one year.
3. Section 9 of the Employment Agreement is hereby deleted in its
entirety and the following provision is hereby substituted therefor:
(a) You will not during the Employment Period and for the period of
two years following date of your termination of employment with the Company
or any of its subsidiaries for any reason (the "Noncompetition Period") (i)
-----------------------
in any geographic area where the Company conducts business during the
Noncompetition Period, engage or participate in directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of
an equity or debt investment, lender or in any other manner or capacity,
including, without limitation, by the rendering of services or advice to
any person), or lend your name (or any part or variant thereof) to, any
Competing Business (as defined in below); (ii) deal, directly or
indirectly, in a competitive manner with any customers doing business with
the Company during the Noncompetition Period; (iii) solicit or employ any
officer, director or agent of the Company to become an officer, director,
or agent of you, your respective affiliates or anyone else; or (iv) engage
in or participate in, directly or indirectly, any business conducted under
any name that shall be the same as or similar to the name of the Company or
any trade name used by it. Ownership by you for investment of less than 2%
of the outstanding shares of capital stock or class of debt securities of
any corporation with one or more classes of its capital stock listed on a
national securities exchange or actively traded in the over-the-counter
market shall not constitute a breach of the foregoing covenant. You are
entering into the foregoing covenant to assure Sub of the transfer of the
goodwill of the Company, and in order to induce Sub to consummate the
purchase contemplated by the Merger Agreement.
(b) You will not at any time after the date hereof divulge, furnish
to or make accessible to anyone any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable
or not, with respect to any confidential or secret aspects of the business
of the Company (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers); provided,
--------
however, that nothing herein shall prohibit you from complying with any
-------
order or decree of any court of competent jurisdiction or governmental
entity or other requirements of law, but you will give the Company
reasonably timely notice of the receipt of any such order or decree or
legal requirement, and the foregoing provision shall not apply to (i) any
information which is or becomes generally available to the public through
no breach of this Agreement or (ii) is or becomes available to you on a
non-confidential basis from a source who is not, to your knowledge,
prohibited from disclosing the same by any legal or contractual obligation.
<PAGE>
(c) As used herein, the term "Competing Business" shall mean any
transportation or other business that the Company or any of its affiliates
has engaged in at any time during the Employment Period in any city or
county in any state of the United States, Canada or Mexico including,
without limitation, any business engaged in (i) intermodal marketing, (ii)
flatbed specialized hauling services, (iii) less-then-truckload common
carrier services, (iv) drayage, consolidation, deconsolidation or
distribution services, (v) contract warehousing, freight handling or
logistic services, (vi) comprehensive transportation management programs or
services to third party customers, (vii) freight consolidation and
deconsolidation, (viii) traffic management, and (ix) railroad signal
project management.
4. Notwithstanding anything in this Letter Agreement to the contrary,
nothing herein shall affect the validity of any restrictive covenant you are
bound to pursuant to the Stock Purchase Agreement among you, Gary I. Goldfein,
PMT Holdings, Inc., Interstate Consolidation, Inc., and Interstate Consolidation
Service, Inc., dated as of December 16, 1997.
Please acknowledge your agreement with this Letter Amendment by executing a
counterpart of this Letter Agreement in the appropriate space and returning it
to the Company.
Very truly yours,
PACER INTERNATIONAL, INC.
by _____________________________
Acknowledged and Agreed to
this __ day of ________
________________________________
Allen E. Steiner
<PAGE>
Pacer International, Inc. Exhibit 12.1
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Pro Forma Pro Forma Pro Forma
For the For the for the For the For the
Fiscal Three twelve Fiscal Period
Year Months months Year Dec. 28,
Ended Ended ended Ended 1996 to
Dec. 25, Apr. 2, Apr. 2, Dec. 27, Nov. 12,
1998 1999 1999 1996 1996
----------- ------------ ------------ -------------------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before taxes and minority $25.9 $ 6.5 $28.3 $61.5 $36.8
interest charge
Less: Minority interest charge (1.8) (0.5) (1.8) - -
Plus:
Interest 30.1 7.5 30.1 - 2.0
Estimated interest on rent 18.3 4.9 18.5 11.7 12.4
----------------------------------------------------------------------
72.5 18.4 75.1 73.2 51.2
Fixed Charges:
Interest 30.1 7.5 30.1 - 2.0
Estimated interest portion of rent
expense 18.3 4.9 18.5 11.7 12.4
-------- -------- -------- ---------- ----------
48.4 12.4 48.6 11.7 14.4
Ratio of Earnings to Fixed Charges 1.5x 1.5x 1.5x 6.2x 3.6x
=======================================================================
<CAPTION>
For the For the For the For the
Period Fiscal Three Three
Nov. 13, Year Months Months
1996 to Ended Ended 1998 Ended
Dec. 26, Dec. 25, Apr. 3, Apr. 2
1997 1998 1998 1999
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Income before taxes and minority $1.7 $33.2 $ 5.5 $ 7.6
interest charge
Less: Minority interest charge - - - -
Plus:
Interest 0.3 - - -
Estimated interest on rent 1.8 16.6 4.4 4.4
---------------------------------------------------------------
3.8 49.8 9.9 12.0
Fixed Charges:
Interest 0.3 - - -
Estimated interest portion of rent
expense 1.8 16.6 4.4 4.4
----------------- ---------- ----------- ----------
2.1 16.6 4.4. 4.4
Ratio of Earnings to Fixed Charges 1.8x 3.0x 2.3x 2.7x
===============================================================
</TABLE>
Note: The estimated interest portion of rent expense is assumed to be one-third
of rent expense.
<PAGE>
Exhibit 16.1
August 11, 1999
Office of the Chief Accountant
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir/Madam:
We have read the disclosure relating to item 304 of Regulation S-K included in
the Form S-4 dated August 12, 1999 of Pacer International, Inc. to be filed with
the Securities and Exchange Commission and are in agreement with the statements
contained therein.
Very truly yours,
Arthur Andersen LLP
By: /s/ Roger L. Chelemedos
-----------------------
Roger L. Chelemedos
<PAGE>
Exhibit 21.1
List of the Subsidiaries of Pacer International, Inc.
. Pacer Logistics, Inc.
. Cross Con Transport, Inc.
. Cross Con Terminals, Inc.
. Pacer International Rail Services LLC
. Pacer International Consulting LLC
. Pacer Rail Services LLC
. Pacer Motor Transport Company
. Pacer Express, Inc.
. Pacer Integrated Logistics, Inc.
. PLM Acquisition Corporation
. Manufacturers Consolidation Service, Inc.
. Levcon, Inc.
. Manufacturers Consolidation Service of Canada, Inc.
. Interstate Consolidation Service, Inc.
. Interstate Consolidation Inc.
. Intermodal Container Service, Inc.
. Keystone Terminals Acquisition Corp.
<PAGE>
Exhibit 23.2
[ARTHUR ANDERSEN LLP]
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
San Francisco, California,
Date: August 11, 1999
<PAGE>
EXHIBIT 25.1
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
PACER INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 62-0935669
(State of incorporation) (I.R.S. employer identification no.)
1340 Treat Boulevard, Suite 200
Walnut Creek, California 94596
(Address of principal executive offices) (Zip Code)
11-3/4% Series B Senior Subordinated Notes due 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 28th day
of July, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ James P. Lawler
----------------------------- --------------------------
Assistant Secretary Name: James P. Lawler
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity
<PAGE>
and to make and use a common seal, and alter the seal at pleasure, to
hold, purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and silver bullion
and foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real or
personal, against any claim or claims, adverse to his interest therein,
and to prepare and give certificates of title for any lands or premises in
the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the purchase,
sale, management and disposal of property of all descriptions, and to
prepare and execute all papers which may be necessary or proper in such
business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description, and
to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers, courts,
receivers, assignees, trustees, and from all fiduciaries, and from all
other persons and individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes, safes, vaults and
other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting the
stock, bonds or other obligations of any corporation, association, state
or municipality, and may receive and manage any sinking fund therefor on
such terms as may be agreed upon between the two parties, and in like
manner may act as Treasurer of any corporation or municipality.
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(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction with
any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of responsibility
or trust; to become surety for any person, or persons, for the faithful
performance of any trust, office, duty, contract or agreement, either by
itself or in conjunction with any other person, or persons, corporation,
or corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be entered
in any court of record within the State of Delaware or elsewhere, or which
may now or hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons, corporations,
court, officer, or authority, in the State of Delaware or elsewhere; and
whenever this Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator, guardian,
bailee, or in any other trust capacity, it shall not be required to give
bond with surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it by such
appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts and
evidences of indebtedness, of any private, public or municipal corporation
within and without the State of Delaware, or of the Government of the
United States, or of any state, territory, colony, or possession thereof,
or of any
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foreign government or country; to receive, collect, receipt for, and
dispose of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and all the
rights, powers and privileges of individual owners thereof, including the
right to vote thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as it may think
fit and proper, and from time to time to vary or realize such investments;
to issue bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property held or owned
by the Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law, to
lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by the
laws of the State of Delaware, it is hereby expressly provided that the said
Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in cash,
stock of this Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so purchased; to conduct
in any lawful manner the whole or any part of any business so acquired,
and to exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without limit
as to amount, to draw, make, accept, endorse, discount, execute and issue
promissory notes,
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drafts, bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire, to
hold, own, to mortgage, sell, convey or otherwise dispose of, real and
personal property, of every class and description, in any State, District,
Territory or Colony of the United States, and in any foreign country or
place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted by
reference to or inference from the terms of any other clause of this or
any other paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph shall be
regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or more
series as may from time to time be determined by the Board of Directors each of
said series to be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be cumulative, if
made cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth, the Board
of Directors of the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and
5
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restrictions of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof then outstanding)
from time to time by like action of the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be paid,
the extent of the preference or relation, if any, of such dividends to the
dividends payable on any other class or classes, or series of the same or
other class of stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of any
other class or classes or of any series of the same or any other class or
classes of stock of the Corporation and the terms and conditions of such
conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times at
which, and the terms and conditions on which, Preferred Stock of such
series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-up,
of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or together
with other series of Preferred Stock or all series of Preferred Stock as a
class, to elect one or more directors of the Corporation if there shall
have been a default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such conditions as
the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends on the
Preferred
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<PAGE>
Stock (fixed in accordance with the provisions of section (b) of this Article
Fourth), if any, shall have been met and after the Corporation shall have
complied with all the requirements, if any, with respect to the setting aside of
sums as sinking funds or redemption or purchase accounts (fixed in accordance
with the provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions of
section (b) of this Article Fourth, then and not otherwise the holders of Common
Stock shall be entitled to receive such dividends as may be declared from time
to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this Article
Fourth), to be distributed to the holders of Preferred Stock in the event
of voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder of
Common Stock shall have one vote in respect of each share of Common Stock
held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series or any
additional shares of any class or series to be issued by reason of any increase
of the authorized capital stock of the Corporation of any class or series, or
bonds, certificates of indebtedness, debentures or other securities convertible
into or exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to resolution of
the Board of Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed advisable
by the Board of Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of Preferred
Stock in relation to the relative powers, preferences and rights of each other
series of
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<PAGE>
Preferred Stock shall, in each case, be as fixed from time to time by the Board
of Directors in the resolution or resolutions adopted pursuant to authority
granted in section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of Preferred
Stock as are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution or
resolutions as to any series of Preferred Stock adopted pursuant to section (b)
of this Article Fourth that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of Preferred
Stock may be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such consideration as
shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock may,
without a class or series vote, be increased or decreased from time to time by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be conducted and
managed by a Board of Directors. The number of directors constituting the entire
Board shall be not less than five nor more than twenty-five as fixed from time
to time by vote of a majority of the whole Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly equal
in number as the then total number of directors constituting the whole Board
permits, with the term of office of one class expiring each year. At the annual
meeting of stockholders in 1982, directors of the first class shall be elected
to hold office for a
11
<PAGE>
term expiring at the next succeeding annual meeting, directors of the second
class shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be elected to
hold office for a term expiring at the third succeeding annual meeting. Any
vacancies in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in office,
although less than a quorum, and any directors so chosen shall hold office until
the next annual election of directors. At such election, the stockholders shall
elect a successor to such director to hold office until the next election of the
class for which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of Incorporation
or the By-Laws of the Corporation (and notwithstanding the fact that some lesser
percentage may be specified by law, this Charter or Act of Incorporation or the
By-Laws of the Corporation), any director or the entire Board of Directors of
the Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of directors.
Such nominations shall be made by notice in writing, delivered or mailed by
first class United States mail, postage prepaid, to the Secretary of the
Corporation not less than 14 days nor more than 50 days prior to any meeting of
the stockholders called for the election of directors; provided, however, that
if less than 21 days' notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed, as prescribed, to the Secretary of
the Corporation not later than the close of the seventh day following the day on
which notice of the meeting was mailed to stockholders. Notice of nominations
which are proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age, business
address and, if known, residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of such nominee and (iii)
the number of shares of stock of the Corporation which are beneficially owned by
each such nominee.
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(f) The Chairman of the meeting may, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as may be
provided in the By-Laws as they may from time to time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under the
Act entitled "An Act Providing a General Corporation Law", approved March 10,
1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the whole
Board, may designate any of their number to constitute an Executive Committee,
which Committee, to the extent provided in said resolution, or in the By-Laws of
the Company, shall have and may exercise all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation, and
shall have power to authorize the seal of the Corporation to be affixed to all
papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable for the
payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly authorized
to make, alter or repeal the By-Laws of the Corporation by a vote of the
majority of the entire Board. The stockholders may make, alter or repeal any
By-Law whether or not adopted by them, provided however, that any such
additional By-Laws, alterations or repeal may be adopted only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares of capital
stock of the Corporation
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entitled to vote generally in the election of directors (considered for this
purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the State of
Delaware at such places as may be from time to time designated by the Board, and
the Directors may keep the books of the Company outside of the State of Delaware
at such places as may be from time to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this Article
Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with or into (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other corporation (whether or not itself
an Interested Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions) to or
with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having an
aggregate fair market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of related transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate fair market
value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or dissolution
of the Corporation, or
(E) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation of
the Corporation with any of its Subsidiaries or any similar transaction
(whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Stockholder, or any
Affiliate of any Interested Stockholder,
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shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to
any one or more of clauses (A) through (E) of paragraph 1 of
the section (a).
(b) The provisions of section (a) of this Article Fifteenth shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities
Act of 1933.
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(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis
of information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to
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any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000 or
more.
(e) Nothing contained in this Article Fifteenth shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
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BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
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Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
<PAGE>
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
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for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall be
selected by the Board of Directors from its own members, none of whom shall be
an officer of the Company, and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
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Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than five
(5) members who shall be selected by the Board of Directors from its own members
who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
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ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
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Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a
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transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall recite
that the stock represented thereby is transferrable only upon the books of the
Company by the holder thereof or his attorney, upon surrender of the certificate
properly endorsed. Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate or certificates
shall be issued in lieu thereof. Duplicate certificates of stock shall be issued
only upon giving such security as may be satisfactory to the Board of Directors
or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington Trust
Company" within the inner circle the words "Wilmington,
Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
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ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
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serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
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payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been received by the Corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
ByLaws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
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EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: July 28, 1999 By: /s/ James P. Lawler
---------------------------
Name: James P. Lawler
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has not
been approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
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<CAPTION>
R E P O R T O F C O N D I T I O N
<S> <C> <C>
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------------- ---------------------------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1999.
------------
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins................ 196,035
Interest-bearing balances.......................................... 0
Held-to-maturity securities............................................. 44,909
Available-for-sale securities........................................... 1,396,028
Federal funds sold and securities purchased under agreements to resell.. 127,340
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 4,176,290
LESS: Allowance for loan and lease losses........... 68,543
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve... 4,107,747
Assets held in trading accounts......................................... 0
Premises and fixed assets (including capitalized leases)................ 139,843
Other real estate owned................................................. 1,055
Investments in unconsolidated subsidiaries and associated companies..... 1,225
Customers' liability to this bank on acceptances outstanding............ 0
Intangible assets....................................................... 5,265
Other assets............................................................ 99,075
Total assets............................................................ 6,118,520
CONTINUED ON NEXT PAGE
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................... 4,332,124
Noninterest-bearing............... 959,777
Interest-bearing.................. 3,372,347
Federal funds purchased and Securities sold under agreements to repurchase... 432,395
Demand notes issued to the U.S. Treasury..................................... 28,906
Trading liabilities (from Schedule RC-D)..................................... 0
Other borrowed money:........................................................ ///////
With original maturity of one year or less.............................. 715,000
With original maturity of more than one year............................ 43,000
Bank's liability on acceptances executed and outstanding..................... 0
Subordinated notes and debentures............................................ 0
Other liabilities (from Schedule RC-G)....................................... 93,311
Total liabilities............................................................ 5,644,736
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................ 0
Common Stock................................................................. 500
Surplus (exclude all surplus related to preferred stock)..................... 62,118
Undivided profits and capital reserves....................................... 408,053
Net unrealized holding gains (losses) on available-for-sale securities....... 3,113
Total equity capital......................................................... 473,784
Total liabilities, limited-life preferred stock, and equity capital.......... 6,118,520
</TABLE>
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACER
INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001091735
<NAME> PACER
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR OTHER
<FISCAL-YEAR-END> DEC-25-1998 DEC-26-1997
<PERIOD-START> DEC-27-1997 NOV-14-1997
<PERIOD-END> DEC-25-1998 DEC-26-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 43,900 33,400
<ALLOWANCES> 100 100
<INVENTORY> 0 0
<CURRENT-ASSETS> 47,400 35,900
<PP&E> 95,400 56,500
<DEPRECIATION> 6,600 600
<TOTAL-ASSETS> 156,000 111,900
<CURRENT-LIABILITIES> 84,600 68,400
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 55,600 29,600
<TOTAL-LIABILITY-AND-EQUITY> 156,100 111,900
<SALES> 566,100 57,700
<TOTAL-REVENUES> 590,800 60,000
<CGS> 471,500 48,500
<TOTAL-COSTS> 558,300 58,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 300
<INCOME-PRETAX> 33,200 11,700
<INCOME-TAX> 12,600 700
<INCOME-CONTINUING> 20,600 1,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 20,600 1,000
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACER
INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001091735
<NAME> PACER
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> OTHER YEAR
<FISCAL-YEAR-END> DEC-26-1997 DEC-27-1996
<PERIOD-START> DEC-28-1996 DEC-28-1995
<PERIOD-END> NOV-12-1997 DEC-27-1995
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 39,200
<ALLOWANCES> 0 100
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 42,600
<PP&E> 0 93,900
<DEPRECIATION> 0 67,900
<TOTAL-ASSETS> 0 71,400
<CURRENT-LIABILITIES> 0 68,700
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 (100)
<TOTAL-LIABILITY-AND-EQUITY> 0 71,400
<SALES> 498,400 526,600
<TOTAL-REVENUES> 517,100 548,000
<CGS> 415,400 422,100
<TOTAL-COSTS> 480,900 486,700
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,000 0
<INCOME-PRETAX> 36,800 61,500
<INCOME-TAX> 13,900 23,400
<INCOME-CONTINUING> 22,900 38,100
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,900 38,100
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
Exhibit 99.1
PACER INTERNATIONAL, INC.
LETTER OF TRANSMITTAL
for Tender of all Outstanding
11 3/4% Senior Subordinated Notes due 2007
in exchange for
11 3/4% Series B Senior Subordinated Notes due 2007
Which Have Been Registered Under the Securities Act of 1933
Pursuant to the Prospectus dated , 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
To: Wilmington Trust Company (the "Exchange Agent")
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By Registered or Certified Mail: By Hand Delivery: By Courier:
Wilmington Trust Company Wilmington Trust Company Wilmington Trust Company
Rodney Square North Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street 1100 North Market Street
Wilmington, DE 19890 Wilmington, DE 19890 Wilmington, DE 19890
Attn: Corporate Trust Attn: Corporate Trust Attn: Corporate Trust
Administration, Ann Roberts Administration, Ann Roberts Administration, Ann Roberts
</TABLE>
Facsimile for Eligible Institutions:
Wilmington Trust Company (302) 651-8882
To Confirm by Telephone: (302) 651-8681
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A FACSIMILE
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE
METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS AT THE RISK OF
THE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1999 (the "Prospectus") of Pacer International, Inc., a
Tennessee corporation (the "Company") and this Letter of Transmittal and the
instructions hereto (the "Letter of Transmittal"), which together constitute
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 11 3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange
Notes") that have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of its outstanding 11
3/4% Senior Subordinated Notes due 2007 (the "Old Notes"), of which
$150,000,000 aggregate principal amount is outstanding, upon the terms and
subject to the conditions set forth in the Prospectus. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on , 1999, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term shall mean the latest date and time to which the Exchange Offer is
extended by the Company. Capitalized terms used but not defined herein have
the meaning given to them in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used either if (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders, (ii) tender of Old Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository
Trust Company ("DTC"), pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus by any financial
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Old Notes or (iii) tender of Old Notes is to
be made according to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
Delivery of this Letter of Transmittal and any other required documents must
be made to the Exchange Agent. Delivery of documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" as used herein means any person in whose name Old Notes
are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
All Holders of Old Notes who wish to tender their Old Notes must, prior to
the Expiration Date: (1) complete, sign, and deliver this Letter of
Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to
the address set forth above; and (2) tender (and not withdraw) his or her Old
Notes or, if a tender of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at DTC, confirm such book-entry
transfer (a "Book-Entry Confirmation"), in each case in accordance with the
procedures for tendering described in the Instructions to this Letter of
Transmittal. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or Book-Entry
Confirmation and all other documents required by this Letter of Transmittal to
be delivered to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures"
in the Prospectus. (See Instruction 2.)
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of the Old Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made promptly following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and
if the Company has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
Please read the entire Letter of Transmittal and the Prospectus carefully
before checking any box below. The instructions included in this Letter of
Transmittal must be followed. Questions and requests for assistance or for
additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction
12 herein.
Holders who wish to accept the Exchange Offer and tender their Old Notes
must complete this Letter of Transmittal in its entirety and comply with all
of its terms.
2
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule, attached hereto. The
minimum permitted tender is $1,000 in principal amount of each of the 11 3/4%
Senior Subordinated Notes due 2007. All other tenders must be in integral
multiples of $1,000.
DESCRIPTION OF 11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
Box I
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s)*
(Please fill in, if blank)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(A) (B)
Aggregate Principal
Certificate Number(s)* Amount Tendered
(if less than all)**
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Principal Amount
of Old Notes Tendered
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------
* Need not be completed by book-entry holders.
** Need not be completed by Holders who wish to tender with respect to all Old
Notes listed.
3
<PAGE>
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
Box II Box III
SPECIAL REGISTRATION SPECIAL DELIVERY
INSTRUCTIONS (See Instructions 4, INSTRUCTIONS
5 and 6) (See Instructions 4, 5 and 6)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes in a certificates for Old Notes in a
principal amount not tendered, or principal amount not tendered, or
Exchange Notes issued in exchange Exchange Notes issued in exchange
for Old Notes accepted for for Old Notes accepted for
exchange, are to be issued in the exchange, are to be delivered to
name of someone other than the someone other than the
undersigned. undersigned.
Issue certificate(s) to: Deliver certificate(s) to:
Name _____________________________ Name _____________________________
(Please Print) (Please Print)
__________________________________ __________________________________
(Please Print) (Please Print)
Address __________________________ Address __________________________
__________________________________ __________________________________
(Include Zip Code) (Include Zip Code)
__________________________________ __________________________________
(Tax Identification or Social (Tax Identification or Social
Security Number) Security Number)
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATE(S) FOR OLD NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH
OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED DELIVERY
PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
[_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT MAINTAINED
BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________ [_] The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." (See Instruction 2.)
4
<PAGE>
[_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of tendering Holder(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ ACCOMPANYING INSTRUCTIONS
CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Pacer International, Inc. (the "Company") the principal
amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered hereby in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Old Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent also acts as the agent of the Company and as Trustee and
Registrar under the Indenture for the Old Notes and the Exchange Notes) with
respect to the tendered Old Notes with full power of substitution (such power
of attorney being deemed an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver certificates for such Old Notes to the Company or transfer ownership
of such Old Notes on the account books maintained by DTC, together, in either
such case, with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company and (ii) present such Old Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretative advice given by the staff of the Securities and
Exchange Commission to third parties in connection with transactions similar
to the Exchange Offer, so that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than a broker-dealer who
purchased such Old Notes directly from the Company for resale pursuant to Rule
144A or any other available exemption under the Securities Act or a person
that is an "affiliate" of the Company or any Guarantor within the meaning of
Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes.
5
<PAGE>
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement, (as defined in the Prospectus) and that, upon
the issuance of the Exchange Notes, the Company will have no further
obligations or liabilities thereunder (except in certain limited
circumstances).
The undersigned represents and warrants that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving Exchange Notes (which shall be the
undersigned unless otherwise indicated in the box entitled "Special Delivery
Instructions" above) (the "Recipient"), (ii) neither the undersigned nor the
Recipient (if different) is engaged in, intends to engage in or has any
arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and (iii) neither the undersigned nor the
Recipient (if different) is an "affiliate" of the Company or any Guarantor as
defined in Rule 405 under the Securities Act. If the undersigned is not a
broker-dealer, the undersigned further represents that it is not engaged in,
and does not intend to engage in, a distribution of the Exchange Notes. If the
undersigned is a broker-dealer, the undersigned further (x) represents that it
acquired Old Notes for the undersigned's own account as a result of market-
making activities or other trading activities, (y) represents that it has not
entered into any arrangement or understanding with the Company or any
"affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer and (z) acknowledges that it will deliver a prospectus meeting
the requirements of the Securities Act (for which purposes delivery of the
Prospectus, as the same may be hereafter supplemented or amended, shall be
sufficient) in connection with any resale of Exchange Notes received in the
Exchange Offer. Such a broker-dealer will not be deemed, solely by reason of
such acknowledgment and prospectus delivery, to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned understands and agrees that the Company reserves the right
not to accept tendered Old Notes from any tendering holder if the Company
determines, in its sole and absolute discretion, that such acceptance could
result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old
Notes tendered hereby and to acquire Exchange Notes issuable upon the exchange
of such tendered Old Notes, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title thereto, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed to be necessary or
desirable by the Exchange Agent or the Company in order to complete the
exchange, assignment and transfer of tendered Old Notes or transfer of
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or, as set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
The undersigned understands that the Company may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
validly tendered Old Notes when, as and if the Company has given oral (which
shall be confirmed in writing) or written notice thereof to the Exchange
Agent.
The undersigned understands that the first interest payment following the
Expiration Date will include unpaid interest on the Old Notes accrued through
the date of issuance of the Exchange Notes.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter of Transmittal, the
Prospectus shall prevail.
6
<PAGE>
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC),
at the Company's cost and expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that upon the receipt of notice by the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make
the statements therein not misleading (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use
of the Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission and has furnished copies of the
amended or supplemented prospectus to such broker-dealer.
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and return any certificates
for Old Notes not tendered or not exchanged, in the name(s) of the undersigned
(or, in either such event in the case of Old Notes tendered by DTC, by credit
to the account at DTC). Similarly, unless otherwise indicated under "Special
Delivery Instructions," please send the certificates representing the Exchange
Notes issued in exchange for the Old Notes accepted for exchange and any
certificates for Old Notes not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s), unless, in either event, tender is being made
through DTC. In the event that both "Special Registration Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Old Notes accepted
for exchange in the name(s) of, and return any certificates for Old Notes not
tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligations pursuant to the "Special
Registration Instructions" or "Special Delivery Instructions" to transfer any
Old Notes from the name of the registered Holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered.
Holders who wish to tender the Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date, may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1
regarding the completion of the Letter of Transmittal.
7
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
AND WHETHER OR NOT TENDER IS TO BE MADE
PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES
This Letter of Transmittal must be signed by the registered holder(s) as
their name(s) appear on the Old Notes or, if tendered by a participant in DTC,
exactly as such participant's name appears on a security listing as the owner
of Old Notes, or by person(s) authorized to become registered holder(s) by a
properly completed bond power from the registered holder(s), a copy of which
must be transmitted with this Letter of Transmittal. If Old Notes to which
this Letter of Transmittal relate are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's authority so to act. (See
Instruction 4.)
X ____________________________________ ______________________________________
Date
X ____________________________________ ______________________________________
Date
Date Signature(s) of Holder(s) or
Authorized Signatory Name(s):
Name(s): _____________________________ Address: _____________________________
Name(s): _____________________________ Address: _____________________________
(Please Print) (including Zip Code)
Capacity: ____________________________ Area Code and Telephone Number: ______
Social Security No.: _________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
8
<PAGE>
Box IV
SIGNATURE GUARANTEE (See Instruction 1)
Certain Signatures Must Be Guaranteed by an Eligible Institution
------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
------------------------------------------------------------------------------
(Authorized Signature)
------------------------------------------------------------------------------
(Printed Name)
------------------------------------------------------------------------------
(Title)
Date: ____________________
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal need
not be guaranteed if (a) this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered herewith and such holder(s)
have not completed the box set forth herein entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" or (b) such
Old Notes are tendered for the account of an Eligible Institution. (See
Instruction 6.) Otherwise, all signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution"). All
signatures on bond powers and endorsements on certificates must also be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes. Certificates for
all physically delivered Old Notes or confirmation of any book-entry transfer
to the Exchange Agent at DTC of Old Notes tendered by book-entry transfer, as
well as, in each case (including cases where tender is affected by book-entry
transfer), a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof and any other documents required by this
Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration
Date.
The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and the delivery will be deemed made only when
actually received by the Exchange Agent. If Old Notes are sent by mail,
registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Depositary for purposes of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Depositary may make book-entry
delivery of Old Notes by causing the Depositary to transfer such Old Notes
into the Exchange Agent's account at the Depositary in accordance with the
Depositary's procedures for transfer.
9
<PAGE>
However, although delivery of Old Notes may be effected through book-entry
transfer at the Depositary, the Letter of Transmittal, with any required
signature guarantees or an Agent's Message (as defined below) in connection
with a book-entry transfer and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address
specified on the cover page of the Letter of Transmittal on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
A Holder may tender Old Notes that are held through the Depositary by
transmitting its acceptance through the Depositary's Automatic Tender Offer
Program, for which the transaction will be eligible, and the Depositary will
then edit and verify the acceptance and send an Agent's Message to the
Exchange Agent for its acceptance. The term "Agent's Message" means a message
transmitted by the Depositary to, and received by, the Exchange Agent and
forming part of the Book-Entry Confirmation, which states that the Depositary
has received an express acknowledgment from each participant in the Depositary
tendering the Old Notes and that such participant has received the Letter of
Transmittal and agrees to be bound by the terms of the Letter of Transmittal
and the Company may enforce such agreement against such participant.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date or comply with book-entry transfer procedures on
a timely basis must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. See "The Exchange Offer--
Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, overnight courier, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal (or facsimile hereof) together
with the certificate(s) representing the Old Notes and any other required
documents will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) such properly completed and executed Letter of Transmittal
(or facsimile hereof), as well as all other documents required by this Letter
of Transmittal and the certificate(s) representing all tendered Old Notes in
proper form for transfer (or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at DTC), must be received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all in the manner provided in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder who
wishes to tender his Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to Holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. All tendering holders, by execution
of this Letter of Transmittal (or facsimile thereof), shall waive any right to
receive notice of the acceptance of the Old Notes for exchange. The Company
reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any irregularities or conditions of tender as to particular Old
Notes, The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured to the Company's satisfaction or waived. Any
Old Notes received by the Exchange Agent that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders pursuant to the
Company's determination, unless otherwise provided in this Letter of
Transmittal as soon as practicable following the Expiration Date. The Exchange
Agent has no fiduciary duties to the Holders with respect to the Exchange
Offer and is acting solely on the basis of directions of the Company.
10
<PAGE>
3. Inadequate Space. If the space provided is inadequate, the certificate
numbers and/or the number of Old Notes should be listed on a separate signed
schedule attached hereto.
4. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial owner of Old Notes who is not the
registered Holder and who wishes to tender should arrange with such registered
holder to execute and deliver this Letter of Transmittal on such beneficial
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the registered holder or properly
endorsed certificates representing such Old Notes.
5. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted only
in integral multiples of $1,000. If less than the entire principal amount of
any Old Notes is tendered, the tendering Holder should fill in the principal
amount tendered in the third column of the box entitled "Description of 11
3/4% Senior Subordinated Notes due 2007" above. The entire principal amount of
any Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all Old
Notes is not tendered, then Old Notes for the principal amount of Old Notes
not tendered and a certificate or certificates representing Exchange Notes
issued in exchange for any Old Notes accepted will be sent to the Holder at
his or her registered address, unless a different address is provided in the
"Special Delivery Instructions" box above on this Letter of Transmittal or
unless tender is made through DTC, promptly after the Old Notes are accepted
for exchange.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes, or, in the case of Old
Notes transferred by book-entry transfer the name and number of the account at
DTC to be credited), (iii) be signed by the Depositor in the same manner as
the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Registrar with respect to the
Old Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn
are validly retendered. Any Old Notes which have been tendered but which are
not accepted for exchange by the Company will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described in
the Prospectus under "The Exchange Offer--Procedures for Tendering" at any
time prior to the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the Old Note without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many copies of this Letter
of Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders (which term, for the purposes described herein,
shall include a book-entry transfer facility whose name appears on a security
listing as the owner of the Old Notes) of Old Notes tendered and the
certificate or certificates for Exchange Notes issued in exchange therefor is
11
<PAGE>
to be issued (or any untendered principal amount of Old Notes to be reissued)
to the registered Holder, then such Holder need not and should not endorse any
tendered Old Notes, nor provide a separate bond power. In any other case, such
Holder must either properly endorse the Old Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal with
the signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers in each case
signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which
Exchange Notes or substitute Old Notes for principal amounts not tendered or
not accepted for exchange are to be issued or sent, if different from the name
and address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
8. Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
federal income tax laws, payments that may be made by the Company on account
of Exchange Notes issued pursuant to the Exchange Offer may be subject to
backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute
Form W-9 included in this Letter of Transmittal and either (a) provide the
correct taxpayer identification number ("TIN") and certify, under penalties of
perjury, that the TIN provided is correct and that (i) the holder has not been
notified by the Internal Revenue Service (the "IRS") that the holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (ii) the IRS has notified the holder that the holder is no longer
subject to backup withholding; or (b) provide an adequate basis for exemption.
If the tendering holder has not been issued a TIN and has applied for one, or
intends to apply for one in the near future, such holder should check the box
in Part 3 of the Substitute Form W-9, sign and date the Substitute Form W-9
and sign the Certificate of Payee Awaiting Taxpayer Identification Number. If
the box in Part 3 is checked, the Company (or the Paying Agent under the
Indenture governing the Exchange Notes) shall retain 31% of payments made to
the tendering holder during the sixty-day period following the date of the
Substitute Form W-9. If the Holder furnishes the Exchange Agent or the Company
with its TIN within sixty days after the date of the Substitute Form W-9, the
Company (or the Paying Agent) shall remit such amounts retained during the
sixty-day period to the Holder and no further amounts shall be retained or
withheld from payments made to the Holder thereafter. If, however, the Holder
has not provided the Exchange Agent or the Company with its TIN within such
sixty-day period, the Company (or the Paying Agent) shall remit such
previously retained amounts to the IRS as backup withholding. In general, if a
Holder is an individual, the TIN is the Social Security number of such
individual. If the Exchange Agent or the Company are not provided with the
correct TIN, the Holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. Certain Holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such Holder must submit a statement
(generally, IRS Form W-8), signed under penalties of perjury, attesting to
that individual's exempt status. Such statements can be obtained from the
Exchange Agent. For further information concerning backup withholding and
instructions for completing the Substitute Form W-9 (including how to obtain a
taxpayer identification number if you do not have one and how to complete the
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<PAGE>
Substitute Form W-9 if Old Notes are registered in more than one name),
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause Old
Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Exchange Notes. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be registered in the name of, any person other than the registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in
the name of a person other than the person signing this Letter of Transmittal,
or if a transfer tax is imposed for any reason other than the exchange of Old
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or on any other persons) will
be payable by the tendering Holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with this Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder. See the Prospectus under "The Exchange Offer--Solicitation
of Tenders; Fees and Expenses."
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Company reserves the right, in their sole
discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
12. Requests for Assistance or Additional Copies. Requests for assistance
and requests for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holder may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
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<PAGE>
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
Certificate Surrendered Old Notes Tendered Old Notes Accepted
<S> <C> <C>
______________________________ ______________________________ ______________________________
______________________________ ______________________________ ______________________________
Date Received_________________ Checked by____________________ Date__________________________
Delivery Prepared by__________ Checked by____________________ Date__________________________
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish
a basis for exemption from backup withholding. If such Holder is an
individual, the TIN is his social security number. If the Exchange Agent is
not provided with the correct TIN, a $50 penalty may be imposed by the
Internal Revenue Service, and payments made pursuant to the Exchange Offer may
be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
20% of any payments made to the Holder or other payee. Backup withholding is
not an additional federal income tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i)
the Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) the Holder has been notified by the Internal Revenue Service
that the Holder is subject to backup withholding as a result of failure to
report all interest or dividends or (B) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding
or (ii) an adequate basis for exemption.
What Number to Give the Exchange Agent
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
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<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
Payer's Name: Pacer International, Inc.
- -------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR Social Security
TIN IN THE BOX AT RIGHT AND Number(s) or
CERTIFY BY SIGNING AND
DATING BELOW Employer Identification
Number(s)
SUBSTITUTE
W-9
Form
--------------------------
-----------------------------------------------------------
Part 2--Certification--Under penalties of perjury, I
certify that:
Department of the (1) The number shown on this form is my correct taxpayer
Treasury identification number (or I am waiting for a number
Internal Revenue to be issued to me), and
Service
Part 3--Awaiting TIN [_]
Payer's Request
For Taxpayer (2) I am not subject to back up withholding because: (a)
Identification I am exempt from backup withholding, or (b) I have
Number ("TIN") not been notified by the Internal Revenue Service
and Certification (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am
no longer subject to back up withholding.
Certification Instructions--You must cross out item (2)
above if you have been notified by the IRS that you are
currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
-----------------------------------------------------------
Name ________________________
Address _____________________
Signature ___________________
Date: _______________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY REPORTABLE CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable cash payments made to me thereafter
will be withheld until I provide a taxpayer identification number.
-------------------------------------- --------------------------------------
Signature Date
15
