<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of Report (Date of earliest event reported) January 13, 2000
----------------
PACER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission file number 333-85041
Tennessee 62-0935669
--------------------------- ----------
(State or other jurisdiction (I.R.S. employer
of incorporation) identification no.)
1340 Treat Blvd., Suite 200
Walnut Creek, CA 94596
Telephone Number (800) 225-4222
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the terms of the Asset Purchase Agreement dated as of December
31, 1999, as amended (the "Purchase Agreement"), among Conex Acquisition
------------------
Corporation, a Delaware corporation ("Acquisition Corp."), Conex Global
----------------
Logistics Services, Inc., a California corporation ("Conex"), MSL Transportation
-----
Group, Inc., a California corporation ("MSL"), Jupiter Freight, Inc., a
---
California corporation ("Jupiter"), and certain other persons identified on the
-------
signature page thereto, Acquisition Corp. acquired substantially all of the
assets, and assumed certain specified liabilities, of Conex, MSL and Jupiter.
Acquisition Corp. is a wholly-owned subsidiary of Pacer International, Inc., a
Tennessee corporation ("Pacer"). Conex, MSL and Jupiter employ approximately 200
-----
persons and provide intermodal freight transportation, cartage, transloading and
warehousing services in the following locations: Los Angeles, California; San
Diego, California; Calexico, California; Seattle, Washington; and Atlanta,
Georgia. The Acquired Assets (as defined in the Purchase Agreement) will be
employed in substantially the same manner as used by Conex, MSL and Jupiter in
their respective businesses prior to the acquisition. Certain top senior
executives at Conex have executed multi-year employment and/or consulting
agreements with Acquisition Corp. in order to assist in the assimilation and
management of the Conex, MSL and Jupiter businesses into Pacer's operations.
In consideration for the Acquired Assets, Acquisition Corp. assumed the
Assumed Obligations (as defined in the Purchase Agreement) and collectively paid
Conex, MSL and Jupiter approximately $25,000,000 in cash, issued Conex an 8.0%
contingent note in the aggregate principal amount of $5,000,000 and issued Conex
300,000 shares of common stock of Pacer. The cash portion and the miscellaneous
closing fees and expenses were funded with excess cash and borrowings under the
Credit Agreement dated as of May 28, 1999 (the "Credit Agreement"), among Pacer,
----------------
Credit Suisse First Boston, Morgan Stanley Senior Funding, Inc., Bankers Trust
Company ("BT") and the other persons identified on the signature page thereto.
--
Upon execution of the Subsidiary Assumption Agreement dated January 13, 2000,
among Pacer, Acquisition Corp. and BT, Acquisition Corp. became a guarantor of
the obligations under the Credit Agreement.
Acquisition Corp. will execute a supplement to the Indenture dated May 28,
1999, among Pacer, the guarantors named therein and Wilmington Trust Company,
resulting in Acquisition Corp. becoming a guarantor of Pacer's obligations
thereunder.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The financial statements required by Rule 3.05(b) of Regulation S-X will be
filed as soon as they are available, but not later than March 28,2000.
The pro forma financial information required by Article 11 of Regulation S-X
will be filed as soon as it is available, but not later than March 28, 2000.
*2.1 Asset Purchase Agreement dated as of December 31, 1999 (the "Asset Purchase
Agreement"), by and among Conex Acquisition Corporation, a Delaware corporation,
Conex Global Logistics Services, Inc., a California corporation, MSL
Transportation, Inc., a California corporation, Jupiter Freight, Inc., a
California corporation, The Michael W. Keller Living Trust, The Uchida Family
Trust, Michael Keller, and Shigehiro Uchida.
*2.2 Amendment dated January 12, 2000 to the Asset Purchase Agreement.
*99.1 Press Release of Pacer International, Inc. dated January 14, 2000.
- ------------------
*Filed herewith
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PACER INTERNATIONAL, INC.
Date: January 25, 2000
----------------
By: /s/ L.C. Yarberry
---------------------------
L.C. Yarberry
Vice President - Finance
(Principal Financial Officer)
3
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- ------
*2.1 Asset Purchase Agreement dated as of December 31, 1999 (the "Asset
Purchase Agreement"), by and among Conex Acquisition Corporation, a Delaware
corporation, Conex Global Logistics Services, Inc., a California corporation,
MSL Transportation, Inc., a California corporation, Jupiter Freight, Inc., a
California corporation, The Michael W. Keller Living Trust, The Uchida Family
Trust, Michael Keller and Shigehiro Uchida.
*2.2 Amendment dated January 12, 2000 to the Asset Purchase Agreement.
*99.1 Press Release of Pacer International, Inc. dated January 14, 2000.
____________________ *Filed herewith
4
<PAGE>
EXHIBIT 2.1
________________________________________________________________________________
ASSET PURCHASE AGREEMENT
AMONG
CONEX ACQUISITION CORPORATION,
CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.,
JUPITER FREIGHT, INC.,
THE MICHAEL W. KELLER LIVING TRUST,
THE UCHIDA FAMILY TRUST,
MICHAEL KELLER,
AND
SHIGEHIRO UCHIDA
Dated as of December 31, 1999
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I PURCHASE AND SALE OF ASSETS............................................................. 6
1.1 Transfer of Purchased Assets............................................................ 6
1.2 Assets Not Being Transferred............................................................ 7
1.3 Instruments of Conveyance and Transfer, Etc............................................. 8
1.4 Further Assurances...................................................................... 9
1.5 Assignment of Contracts, Rights, Etc.................................................... 9
1.6 Power of Attorney; Right of Endorsement, Etc............................................ 9
ARTICLE II ASSUMED LIABILITIES; EXCLUDED LIABILITIES.............................................. 10
2.1 Liabilities Being Assumed............................................................... 10
2.2 Liabilities Not Being Assumed........................................................... 10
2.3 Instrument of Assumption................................................................ 13
ARTICLE III PURCHASE PRICE........................................................................ 13
3.1 Purchase Price.......................................................................... 13
3.2 Payment at Closing...................................................................... 13
3.3 Allocation of the Purchase Price to the Purchased Assets................................ 14
Article IV THE CLOSING............................................................................ 14
ARTICLE V POST-CLOSING ADJUSTMENT OF NOTE PORTION................................................. 15
5.1 Adjustment Based on 1999 Adjusted EBIT.................................................. 15
5.2 Adjustment Based on 2000 Adjusted EBIT.................................................. 16
ARTICLE VI POST-CLOSING WORKING CAPITAL ADJUSTMENT................................................ 19
6.1 Delivery of Closing Balance Sheet....................................................... 19
6.2 Review and Final Determination of Final Net Working Capital............................. 19
6.3 Adjustment of Purchase Price; Payments.................................................. 20
Article VII REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP.................................... 21
7.1 Organization, Power, Authority and Good Standing........................................ 21
7.2 Authority; Authorization, Execution and Delivery; Enforceability........................ 21
7.3 Consents................................................................................ 22
7.4 Capitalization.......................................................................... 22
7.5 Subsidiaries; Investments............................................................... 23
7.6 Financial Information................................................................... 23
7.7 Absence of Undisclosed Liabilities...................................................... 24
7.8 Absence of Changes...................................................................... 24
7.9 Tax Matters............................................................................. 25
7.10 Title to Assets, Properties and Rights and Related Matters.............................. 27
7.11 Real Property-Owned or Leased........................................................... 28
7.12 Intellectual Property................................................................... 28
7.13 Agreements, No Defaults, Etc............................................................ 29
7.14 Litigation, Etc......................................................................... 31
7.15 Compliance with Laws.................................................................... 31
7.16 Insurance............................................................................... 32
7.17 Labor Relations; Employees............................................................. 32
7.18 ERISA Compliance........................................................................ 34
7.19 Environmental Matters................................................................... 36
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
7.20 Brokers............................................................................ 37
7.21 Related Party Transactions......................................................... 37
7.22 Accounts and Notes Receivable...................................................... 37
7.23 Bank Accounts; Powers of Attorney.................................................. 38
7.24 Suppliers and Vendors.............................................................. 38
7.25 Customers.......................................................................... 38
7.26 Conflicts of Interest.............................................................. 38
7.27 Investor Representations........................................................... 39
7.28 Year 2000.......................................................................... 39
7.29 Disclosure......................................................................... 40
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF EACH MEMBER OF THE SHAREHOLDER GROUP............... 40
8.1 Generally.......................................................................... 40
8.2 Brokers............................................................................ 41
ARTICLE IX REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................ 41
9.1 Organization; Corporate Authority.................................................. 41
9.2 Authority; Authorization; Execution and Delivery; Enforceability; No Conflict...... 41
9.3 Consents........................................................................... 42
9.4 Pacer Capitalization............................................................... 42
9.5 Duly Authorized, Validly Issued Pacer Shares....................................... 42
9.6 Brokers............................................................................ 43
ARTICLE X COVENANTS AND AGREEMENTS................................................................ 43
10.1 Access to Records and Properties................................................... 43
10.2 Conduct of the Business............................................................ 43
10.3 Efforts to Consummate.............................................................. 44
10.4 Negotiation with Others............................................................ 44
10.5 Financing.......................................................................... 45
10.6 Notice of Prospective Breach....................................................... 45
10.7 Public Announcements............................................................... 45
10.8 Exchange Proceeds.................................................................. 46
10.9 Non-Competition Covenant........................................................... 46
10.10 Disclosure of Information.......................................................... 47
10.11 Use of Proprietary Name............................................................ 49
10.12 Supplements to Schedules........................................................... 49
10.13 Certain Employee Matters........................................................... 49
10.14 Transfer of Pacer Shares........................................................... 50
10.15 Non-Solicitation Covenant.......................................................... 50
ARTICLE XI CLOSING CONDITIONS..................................................................... 50
11.1 Conditions to Each Party's Obligations............................................. 50
11.2 Conditions to Obligations of the Purchaser......................................... 51
11.3 Conditions to Obligations of each Company and the Shareholders..................... 53
ARTICLE XII INDEMNIFICATION....................................................................... 54
12.1 Generally.......................................................................... 54
12.2 Assertion of Claims................................................................ 56
12.3 Notice and Defense of Third Party Claims........................................... 56
12.4 Survival of Representations and Warranties......................................... 57
12.5 Limitations on Indemnification..................................................... 58
12.6 Satisfaction of Indemnification Obligations........................................ 58
ARTICLE XIII TERMINATION; EFFECT OF TERMINATION................................................... 59
13.1 Termination........................................................................ 59
</TABLE>
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<TABLE>
<S> <C>
13.2 Effect of Termination........................................................................ 60
ARTICLE XIV MISCELLANEOUS PROVISIONS................................................................ 61
14.1 Amendment.................................................................................. 61
14.2 Entire Agreement........................................................................... 61
14.3 Severability............................................................................... 61
14.4 Benefits of Agreement...................................................................... 61
14.5 Expenses; Sales and Transfer Taxes......................................................... 62
14.6 Remedies................................................................................... 62
14.7 Notices.................................................................................... 62
14.8 Counterparts and Facsimile Execution....................................................... 64
14.9 Governing Law............................................................................. 64
14.10 Jurisdiction and Venue..................................................................... 65
14.11 MUTUAL WAIVER OF JURY TRIAL................................................................ 65
14.12 Mutual Contribution........................................................................ 65
14.13 No Third-Party Beneficiaries............................................................... 65
14.14 Independence of Covenants and Representations and Warranties............................... 66
14.15 Interpretation; Construction............................................................... 66
</TABLE>
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<PAGE>
ANNEXES, SCHEDULES AND EXHIBITS
ANNEXES
- -------
Annex I Definitions
Annex II Adjusted EBIT
SCHEDULES
- ---------
Schedule I - Excluded Contracts
Schedule II - Group Health Insurance Plans to be Assumed by the
Purchaser
Schedule 7.1 - Organization, Power, Authority and Good Standing
Schedule 7.2 - Conflicts
Schedule 7.3 - Consents
Schedule 7.4 - Capitalization
Schedule 7.5 - Subsidiaries; Investments
Schedule 7.6 - Financial Information
Schedule 7.6(d) - Accounts Payable, Accrued Expenses and Accounts
Receivable
Schedule 7.7 - Disclosed Liabilities
Schedule 7.8 - Changes
Schedule 7.9(a) - Tax Matters
Schedule 7.9(c) - Taxing Authority Notifications
Schedule 7.10 - Encumbrances
Schedule 7.11(a) - Real Property Descriptions
Schedule 7.11(b) - Real Property Notices
Schedule 7.12(a) - Licensed Requisite Rights
Schedule 7.12(b) - Patents, Trademarks and Service marks
Schedule 7.13(a) - Contracts
Schedule 7.13(d) - Funded Indebtedness
Schedule 7.14(a) - Pending Litigation
Schedule 7.14(b) - Resolved Litigation
Schedule 7.15 - Permits; Compliance with Laws
Schedule 7.16(a) - Insurance Policies
Schedule 7.16(b) - Insurance Claims, Etc.
Schedule 7.17(a) - Key Employees
Schedule 7.17(b) - Employees
Schedule 7.17(c) - Employee Relations
Schedule 7.17(e) - Employment Violations
Schedule 7.17(f) - Joint Employer; Alter Ego
Schedule 7.17(g) - Independent Contractors
Schedule 7.18(a) - Employee Benefit Plans
Schedule 7.18(b) - ERISA Compliance
Schedule 7.19(a) - Environmental Laws - Violations
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<PAGE>
Schedule 7.19(b) - Previous Facilities - Environmental Compliance
Schedule 7.21 - Related Party Transactions
Schedule 7.22 - Accounts and Notes Receivable
Schedule 7.23 - Bank Accounts; Powers of Attorney
Schedule 7.25 - Customers
Schedule 9.1 - Purchaser Foreign Qualifications
Schedule 9.3 - Purchaser Consents
Schedule 9.4 - Pacer Capitalization
Schedule 11.2(i)(iv) - Post-Closing Leased Real Property
EXHIBITS
- --------
Exhibit A - Form of Bill of Sale
Exhibit B - Form of Assumption Agreement
Exhibit C - Form of Seller Note
Exhibit D - [Intentionally Omitted.]
Exhibit E - Forms of Employment Agreements
Exhibit F - Form of Uchida Consulting Agreement
Exhibit G - Form of Joinder Agreement
Exhibit H - Form of Lease
-v-
<PAGE>
INDEX OF DEFINED TERMS
The following capitalized terms, which may be used in more than one Section
or other location of this Agreement, are defined in the following Sections or
other locations.
<TABLE>
<CAPTION>
Section or
Term other Location
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<S> <C>
Acquisition Proposal.......................................................... Annex I
Adjusted EBIT................................................................. Annex II
Affiliate..................................................................... Annex I
Agreement..................................................................... 14.15
Arbitrating Accountants....................................................... 5.1(b)
Assigned Contracts............................................................ Annex I
Assumed Liabilities........................................................... 2.1(b)
Assumed Liabilities Portion................................................... 3.1(d)
Assumption Agreement.......................................................... 2.3
Audited Balance Sheet......................................................... 7.6(a)(ii)
Audited Balance Sheet Date.................................................... 7.6(a)(ii)
Audited Financial Statements.................................................. 7.6(a)(ii)
Best Knowledge................................................................ 14.15
Bill of Sale.................................................................. 1.3
Business...................................................................... Preamble
Business Day.................................................................. Annex I
Capital Lease................................................................. Annex I
Cash Portion.................................................................. 3.1(a)
Charter Documents............................................................. Annex I
Closing Balance Sheet......................................................... 6.1
Closing Date.................................................................. Article IV
Closing....................................................................... Article IV
COBRA......................................................................... 7.18(b)(viii)
Code.......................................................................... 3.3(a)
Company Employee Plans........................................................ 7.18(a)
Company....................................................................... Caption
Competing Business............................................................ 10.9(a),(b)
Conex......................................................................... Caption
Confidential Information...................................................... 10.10(a)
Contract...................................................................... Annex I
Control....................................................................... Annex I
Covered Properties............................................................ 10.19(b)
Employee Benefit Plan......................................................... Annex I
Encumbrances.................................................................. Annex I
Environmental, Health and Safety Laws......................................... Annex I
ERISA Affiliate............................................................... Annex I
Exchange Proceeds............................................................. 10.8
Excluded Aircraft............................................................. 1.2(a)(vii)
</TABLE>
<PAGE>
<TABLE>
Section or
Term other Location
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<S> <C>
Excluded Assets............................................................... 1.2(b)
Excluded Contracts............................................................ Annex I
Excluded Liabilities.......................................................... 2.2(b)
Excluded Vehicle.............................................................. 1.2(a)(vi)
Final Determination Date...................................................... 5.1(b)
Final Net Working Capital..................................................... 6.1
Final Net Working Capital Statement........................................... 6.1
Financial Statements.......................................................... 7.6(a)(iii)
Financing..................................................................... 10.5
Funded Indebtedness........................................................... Annex I
GAAP.......................................................................... Annex I
Governmental Entity........................................................... Annex I
Guaranty...................................................................... Annex I
Health Plan................................................................... Annex I
HIPAA......................................................................... 7.18(b)(viii)
Hired Employees............................................................... 10.13
HSR Act....................................................................... 10.3
Income Taxes.................................................................. Annex I
Indemnified Persons........................................................... Annex I
Indemnifying Persons.......................................................... Annex I
Intellectual Property Rights.................................................. Annex I
Joinder Agreements............................................................ 11.2(i)(iii)
Jupiter....................................................................... Caption
Keller........................................................................ Caption
Keller Employment Agreement................................................... 11.2(i)(i)
Keller Trust.................................................................. Caption
Latest Balance Sheet Date..................................................... 7.6(a)(iii)
Latest Balance Sheet.......................................................... 7.6(a)(iii)
Law........................................................................... Annex I
Lease......................................................................... 11.2(i)(iv)
Leased Property............................................................... 7.11(a)
Liability..................................................................... Annex I
Licensed Requisite Rights..................................................... 7.12(a)(i)
Litigation Expense............................................................ Annex I
Losses........................................................................ Annex I
Material Adverse Change....................................................... 7.8(a)
Material Contracts............................................................ 7.13(b)
MSL........................................................................... Caption
Non-Solicitation Period....................................................... 10.15
Note Portion.................................................................. 3.1(b)
Note Portion Deficiency....................................................... 5.2(d)
Notice of Disagreement........................................................ 5.1(b)
Orders........................................................................ Annex I
</TABLE>
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<TABLE>
Section or
Term other Location
----- --------------
<S> <C>
Overpayment Amount............................................................ 6.3(a)
Owned Requisite Rights........................................................ 7.12(a)(i)
Pacer......................................................................... 3.1(c)
Pacer IPO..................................................................... Annex I
Pacer Registration Statement.................................................. Annex I
Pacer Shareholders' Agreement................................................. Annex I
Pacer Shares.................................................................. 3.1(c)
Pacer Shares Portion.......................................................... 3.1(c)
Permits....................................................................... Annex I
Permitted Encumbrances........................................................ Annex I
Person........................................................................ Annex I
Proceedings................................................................... Annex I
Pro Forma Statements.......................................................... 7.6(a)(iv)
Purchase Price................................................................ 3.1
Purchased Assets.............................................................. 1.1(b)
Purchaser Indemnified Persons................................................. Annex I
Purchaser Indemnifying Persons................................................ Annex I
Purchaser Losses.............................................................. Annex I
Purchaser..................................................................... Caption
Purchaser's Income Certificate................................................ 5.1(a)
Purchaser's Notice of Adjustment.............................................. 6.1
Related Documents............................................................. Annex I
Representatives............................................................... 10.10(a)
Requisite Rights.............................................................. 7.12(a)(i)
Restrictive Period............................................................ 10.9(a)
Securities.................................................................... Annex I
Securities Act................................................................ Annex I
Seller Group.................................................................. Annex I
Seller Indemnified Persons.................................................... Annex I
Seller Indemnifying Persons................................................... Annex I
Seller Losses................................................................. Annex I
Seller Notes.................................................................. 3.1(b)
Shareholder Group............................................................. Caption
Shareholders.................................................................. Caption
Statement of Allocation....................................................... 3.3
Subsidiary.................................................................... Annex I
Survival Date................................................................. 12.4
Tangible Personal Property.................................................... 1.1(a)(iii)
Tax Return.................................................................... Annex I
Tax(es)....................................................................... Annex I
Third Parties................................................................. 7.17(f)
Third Party Claim............................................................. 12.3
Unaudited Historical Financial Statement...................................... 7.6(a)(i)
</TABLE>
8
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<TABLE>
Section or
Term other Location
----- --------------
<S> <C>
Uchida........................................................................ Caption
Uchida Consulting Agreement................................................... 11.2(i)(ii)
Uchida Employment Agreement................................................... 11.2(i)(i)
Uchida Trust.................................................................. Caption
Unaudited Latest Financial Statements......................................... 6.6(a)(iii)
Underpayment Amount........................................................... 6.6(b)
Working Capital Final Determination Date...................................... 6.2
Working Capital Notice of Disagreement........................................ 6.2
1999 Adjusted EBIT............................................................ 5.1(a)
1999 Income Statement......................................................... 5.1(a)
</TABLE>
9
<PAGE>
EXECUTION COPY
ASSET PURCHASE AGREEMENT dated as
of December 31, 1999, by and among CONEX
ACQUISITION CORPORATION, a Delaware
corporation (the "Purchaser"), CONEX
---------
GLOBAL LOGISTICS SERVICES, INC., a
California corporation ("Conex"), MSL
-----
TRANSPORTATION GROUP, INC., a California
corporation ("MSL"), JUPITER FREIGHT,
---
INC., a California corporation ("Jupiter";
-------
and together with Conex and MSL, each a
"Company" and collectively the
-------
"Companies"), THE MICHAEL W. KELLER LIVING
---------
TRUST (the "Keller Trust"), THE UCHIDA
------------
FAMILY TRUST (the "Uchida Trust"; and
------------
together with the Keller Trust, each a
"Shareholder"; and collectively the
-----------
"Shareholders"), MICHAEL KELLER
------------
("Keller"), and SHIGEHIRO UCHIDA
------
("Uchida"; and together with Keller, the
------
Keller Trust and the Uchida Trust,
collectively, the "Shareholder Group"; and
-----------------
the Shareholder Group and the Companies
collectively, the "Seller Group").
------------
PREAMBLE
The Companies are engaged, collectively, in the business (the "Business")
--------
of providing intermodal freight transportation, drayage, transloading and
warehousing, container depot and repair services. The Shareholders are the sole
shareholders of each Company, with each Shareholder owning that number of
outstanding shares of the capital stock of each Company set forth on Schedule
--------
7.4. Each Company desires, and the Shareholders desire to cause each Company,
- ---
to sell to the Purchaser, and the Purchaser desires to purchase from each
Company, substantially all of the assets of each Company, subject to the
Purchaser's assumption of certain specified liabilities of each Company, all on
the terms and subject to the conditions contained in this Agreement. Certain
capitalized terms used and not otherwise defined elsewhere in this Agreement
have the meanings given to them in Annex I.
-------
ACCORDINGLY, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as set
forth below.
5
<PAGE>
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Transfer of Purchased Assets.
----------------------------
(a) On the terms and subject to the conditions contained in this
Agreement, at the Closing each Company shall sell, transfer, convey and assign
to the Purchaser, free and clear of all Encumbrances (other than Permitted
Encumbrances), and the Purchaser shall purchase and acquire from each Company,
all of such Company's right, title and interest in, to and under all of the
assets, properties, interests in properties and rights of such Company of every
kind and description (other than the Excluded Assets), whether real, personal or
mixed, tangible or intangible, and wherever located, as the same shall exist
immediately prior to the Closing, including the following:
(i) all accounts and notes receivable;
(ii) all inventories of supplies, spare and replacement
parts, shipping containers and materials and other materials that relate
to, or are used or held for use in connection with, the Business, including
all stationery, purchase, sale and service order and other forms, all
labels, catalogs, brochures, art work, and photographs and all marketing
and advertising materials;
(iii) all vehicles (other than the Excluded Vehicle),
tractors, trailers, machinery, equipment, tooling, furniture, fixtures,
leasehold improvements, office equipment, supplies, spare and replacement
parts and other items of tangible personal property (other than the
Excluded Aircraft) (the "Tangible Personal Property");
--------------------------
(iv) all prepaid expenses, advances and deposits (including
utility deposits) (other than the deposits referred to in clauses (vii) and
(xi) of Section 1.2(a) below);
--------------
(v) all deposit, checking and other bank accounts (but
subject to Section 1.2(a)(i) below);
-----------------
(vi) all books, records, files, lists and other information
(whether in hard copy or machine readable form and whether in original or
photostatic form (except in the case of computer software, which must be in
original form)), including property records, production records,
engineering records, purchasing and sales records, personnel and payroll
records, accounting records, mailing lists, customer and vendor lists and
records and computer programs, records, files and related software and
documentation;
(vii) all right, title, and interest of each Company in, to
and under all Assigned Contracts;
(viii) all rights, choses in action and claims, known or
unknown, matured or unmatured, accrued or contingent, against third parties
(including all warranty and other contractual claims, whether express,
implied or otherwise), to the extent relating to any other Purchased Asset
or any Assumed Liability (except that any such right, chose in action or
claim relating to an Excluded Asset or an Excluded Liability shall remain
with
6
<PAGE>
each Company, but only to the extent relating to such Excluded Asset or
Excluded Liability);
(ix) all rights (including experience ratings) with respect to
unemployment, workers' compensation and other similar insurance reserves;
(x) all federal, state, local and foreign governmental
licenses, permits, authorizations and approvals;
(xi) all Requisite Rights (including the entire right, title
and interest of each Company in and to the names "Conex", "MSL" and
"Jupiter" and the corporate names "Conex Global Logistics Services, Inc.",
"MSL Transportation Group, Inc." and "Jupiter Freight, Inc.," and all
variations of the foregoing), and all goodwill associated therewith;
(xii) all telephone, telex and facsimile numbers and all
listings in all telephone books and directories;
(xiii) all goodwill associated with the Business;
(xiv) all rights, assets and contracts with respect to the
Health Plan; and
(xv) all other assets, properties and rights of any nature
whatsoever used in the operation of the Business or relating to the other
Purchased Assets or the Assumed Liabilities, other than the Excluded
Assets.
(b) For convenience of reference, the assets, properties, interests
in properties and rights that are to be sold, transferred, conveyed and assigned
by the Companies to the Purchaser at the Closing pursuant to Section 1.1(a) are
--------------
collectively called the "Purchased Assets" in this Agreement.
----------------
(c) Anything contained in this Agreement to the contrary
notwithstanding, to the extent that any asset, property, interest in property or
right relating to, or used or held for use by, any Company, in the conduct of
the operation of the business of such Company (excluding however the fee title
to any Leased Property), is owned by any Shareholder, any Subsidiary of any
Company or any other Affiliate of any Company, such asset, property, interest in
property or right shall be deemed to be a Purchased Asset for all purposes of
this Agreement, and each Company and the Shareholders shall do, and shall cause
any such Subsidiary or Affiliate of each Company to do, all things required to
be done by such Company with respect thereto under this Agreement, including
those things set forth in Sections 1.3, 1.4 and 1.5.
------------ --- ---
1.2 Assets Not Being Transferred.
----------------------------
(a) Anything contained in Section 1.1 or elsewhere in this Agreement
-----------
to the contrary notwithstanding, there are expressly excluded from the Purchased
Assets the following:
(i) all cash and cash equivalents on hand or on deposit in
bank accounts as of the Closing, the Salomon Smith Barney investment
accounts No. 6620300118700 in the name of Conex and No. 6620525318700 in
name of Keller and Uchida and all investment assets held in such account;
7
<PAGE>
(ii) the consideration delivered to the Companies pursuant to
this Agreement;
(iii) all right, title, and interest of each Company in, to, and
under all Excluded Contracts;
(iv) the minute books and ownership record books of each
Company;
(v) the capital stock of or other equity interests in each
Company;
(vi) the BMW 740 IL automobile, vehicle identification
#WBAGJ8325VDM02455 (the "Excluded Vehicle");
----------------
(vii) one Learjet 31A airplane, aircraft registration number
N314MK, and one Cessna T210N airplane, aircraft registration number N9922Y
(collectively, the "Excluded Aircraft") and the deposits in the aggregate
-----------------
amount of approximately $400,000 on aircraft to be delivered;
(viii) the split dollar key-man life insurance policy issued by
New York Life Insurance Company covering Keller owned by Conex in the
aggregate benefit amount of $1,000,000 ($500,000 whole life and $500,000
term life);
(ix) the real property located at 550 S. Alameda Street,
Compton, California;
(x) all assets attributable to any Employee Benefit Plan,
except for assets attributable to the Health Plan; and
(xi) all deposits, rebates and refunds payable by the
Companies' insurance carriers to the extent relating to policy or coverage
periods ending prior to the Closing Date (including, without limitation,
(A) the insurance deposit in the approximate amount of $105,000 with Marsh
& McLennan for the Companies' automobile liability policy that expired on
December 31, 1999, and (B) the insurance refund or "dividend" in the
approximate amount of $25,000 with the Companies' cargo insurance carrier
for 1997 relating to the pending cargo claim with Sony Corp.), but only to
the extent such deposits, rebates and refunds are not included as assets on
the Closing Balance Sheet and do not relate to liabilities included on the
Closing Balance Sheet and assumed by the Purchaser hereunder.
(b) For convenience of reference, the foregoing assets, properties,
interests in properties and rights of each Company which are not included in the
Purchased Assets pursuant to this Section 1.2(a) are collectively called the
--------------
"Excluded Assets" in this Agreement.
---------------
1.3 Instruments of Conveyance and Transfer, Etc.
--------------------------------------------
At the Closing, each Company shall execute and deliver to the Purchaser a
bill of sale in substantially the form of Exhibit A (the "Bill of Sale"), and
--------- ------------
such other deeds, endorsements, assignments and other good and sufficient
instruments of conveyance and transfer as shall be necessary or desirable to
transfer, convey and assign good and marketable title to the Purchased
8
<PAGE>
Assets to the Purchaser free and clear of any and all Encumbrances. Each Company
shall take all reasonable legal steps that may be necessary to put the Purchaser
in possession and operating control of the Purchased Assets.
1.4 Further Assurances.
------------------
Each Company shall promptly pay or deliver to the Purchaser any Purchased
Asset which may be received by any Company after the Closing. Each Company
shall, at any time and from time to time after the Closing, upon the request of
the Purchaser, do, execute, acknowledge and deliver, and cause to be done,
executed, acknowledged or delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney or assurances as may be reasonably
required to transfer, assign, convey, grant and confirm to the Purchaser, or to
aid and assist in the collection of or reducing to possession by the Purchaser,
the Purchased Assets, or to vest in the Purchaser good and marketable title to
the Purchased Assets as herein provided.
1.5 Assignment of Contracts, Rights, Etc.
-------------------------------------
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or an attempted agreement to sell,
transfer, sublease or assign any Assigned Contract (or any claim or right of any
benefit arising thereunder or resulting therefrom) if the attempted transfer,
sublease or assignment thereof, without the consent of any other party thereto,
would constitute a breach thereof or in any way affect the rights of the
Purchaser or any Company thereunder. Each Company shall, and the Shareholders
shall use their commercially reasonable efforts to cause each Company to, use
its respective commercially reasonable efforts to obtain the consent of the
other party to any Assigned Contract to the transfer, sublease or assignment
thereof to the Purchaser in all cases in which such consent is required for the
transfer, sublease or assignment of any such Assigned Contract. If any such
consent is not obtained and the Closing occurs, each Company shall, and the
Shareholders shall use their commercially reasonable efforts to cause each
Company to, use its respective commercially reasonable efforts to provide for
the Purchaser the benefits of such Assigned Contract, including (a) adherence to
reasonable procedures established by the Purchaser for the immediate transfer to
the Purchaser of any payments or other funds received by any Company thereunder
and (b) enforcement for the benefit of the Purchaser of any and all rights of
any Company thereunder against the other party or parties thereto arising out of
the breach or cancellation thereof by such other party or parties or otherwise.
1.6 Power of Attorney; Right of Endorsement, Etc.
---------------------------------------------
Effective as of the Closing, each Company hereby constitutes and appoints
the Purchaser as the true and lawful attorney of such respective Company, with
full power of substitution, in the name of the Purchaser or such Company, on
behalf of and for the benefit of the Purchaser, solely (a) to collect all
Purchased Assets, (b) to endorse, without recourse, checks, notes and other
instruments in connection with or attributable to the Purchased Assets and the
Assumed Liabilities, (c) to institute and prosecute all proceedings which the
Purchaser may deem proper in order to collect, assert or enforce any claim,
right or title in, to or under or otherwise attributable to the Purchased Assets
and the Assumed Liabilities, (d) to defend and compromise all actions, suits or
proceedings with respect to any of the Purchased Assets, as well as any Assigned
Contracts, or the Assumed Liabilities and (e) to do all such reasonable acts and
things with
9
<PAGE>
respect to the Purchased Assets, as well as any Assigned Contracts, or the
Assumed Liabilities as the Purchaser may deem advisable. The foregoing powers
are coupled with an interest and shall not be revocable by any Company directly
or indirectly by the dissolution of such Company or in any other manner. The
Purchaser shall retain for its own account any amounts collected pursuant to the
foregoing powers with respect to the Purchased Assets and the Assigned
Contracts, and each Company shall promptly pay to the Purchaser any amounts
received by such Company after the Closing with respect to the Purchased Assets
and the Assigned Contracts.
ARTICLE II
ASSUMED LIABILITIES; EXCLUDED LIABILITIES
2.1 Liabilities Being Assumed.
-------------------------
(a) Upon the terms and subject to the conditions of this Agreement,
effective as of the Closing, the Purchaser shall assume the following, and only
the following, Liabilities of each Company:
(i) all accounts payable and accrued expenses of the Business
arising in the ordinary course of the Business to the extent accrued or
otherwise reflected as a Liability on the Latest Balance Sheet (or arising
in the ordinary course of business consistent with past practice since the
Latest Balance Sheet Date and on or prior to the Closing Date (excluding in
all cases Taxes for or with respect to any period ending on or prior to the
Closing Date)), in each case determined in accordance with GAAP;
(ii) all Liabilities to be performed after the Closing under the
Assigned Contracts in accordance with their respective terms (excluding any
such Liabilities resulting from or relating to any breach or violation of,
or default under, or any alleged breach or violation of, or alleged default
under, any such Assigned Contract that arises out of or is based upon
facts, events or circumstances occurring or existing as of or prior to the
Closing, notwithstanding that the date on which any Proceeding with respect
thereto is commenced or made is after the Closing), but in each case only
to the extent such Assigned Contracts have been effectively assigned and
transferred to the Purchaser pursuant to the provisions hereof;
(iii) all Liabilities owed to Hired Employees arising after the
Closing; and
(iv) all Liabilities relating to or arising out of the operation
of the Purchased Assets after the Closing Date or out of the conduct of the
Business after the Closing Date.
(b) For convenience of reference, the Liabilities that are to be
assumed by the Purchaser at the Closing pursuant to this Section 2.1 are
-----------
collectively called the "Assumed Liabilities" in this Agreement.
-------------------
2.2 Liabilities Not Being Assumed.
-----------------------------
(a) Anything contained in this Agreement to the contrary
notwithstanding, the Purchaser is not assuming any Liabilities of any Company
other than the Assumed Liabilities, whether or not relating to the Purchased
Assets or the Business, all of which Liabilities shall at
10
<PAGE>
and after the Closing remain the exclusive responsibility and obligation of the
Companies, as applicable. Without limiting the generality of the foregoing, the
Purchaser is not assuming any of the following Liabilities:
(i) any Liability of any Company under this Agreement or any
Related Document;
(ii) any Liability of any Company for expenses, Taxes or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement, the Related Documents or the consummation
(or preparation for the consummation) of the transactions contemplated
hereby or thereby (including all attorneys' and accountants' fees, and
brokerage fees incurred by or imposed upon any Company);
(iii) any Liability of any Company for any indebtedness, whether
the same constitutes Funded Indebtedness or otherwise;
(iv) any Liability of any Company under any Excluded Contract;
(v) any Liability of any Company under any Assigned Contract
resulting from or relating to any breach or violation of, or default under,
or any alleged breach or violation of, or alleged default under, any such
Assigned Contract that arises out of or is based upon facts, events or
circumstances occurring or existing as of or prior to the Closing, whether
the date on which any Proceeding with respect thereto is commenced or made
is before or after the Closing;
(vi) any Liability of any Company for or with respect to any
Taxes for or attributable to any period ending on or prior to the Closing;
(vii) any Liability of any Company arising by reason of any
violation or alleged violation of any Law, Order or other requirement of
any Governmental Entity, including any Environmental, Health and Safety
Laws (including those with respect to a Company's ownership or operation of
any aspect of the Business or the Purchased Assets, whether on or related
to any properties previously owned, leased or occupied by any Company or
otherwise), to the extent any of such Liabilities results from or arises
out of events, facts or circumstances occurring or existing on or prior to
the Closing, notwithstanding that the date on which any Proceeding with
respect thereto is commenced or made is after the Closing;
(viii) any Liability of any Company for which the Purchaser may
become liable as a result of or in connection with the failure by any
Company to fully and properly comply with any and all bulk sales or
transfers laws applicable to the transactions contemplated by this
Agreement;
(ix) any Liability of any Company arising out of the injury to
or death of any person, or damage to or destruction of any property,
whether based on negligence, breach of warranty, strict liability,
enterprise liability or any other legal or equitable theory arising from or
related to services performed by any Company, to the extent any of such
Liabilities results from or arises out of events, facts or circumstances
occurring or
11
<PAGE>
existing on or prior to the Closing, notwithstanding that the date on which
any Proceeding is commenced or made is after the Closing;
(x) any Liability of any Company relating to any Proceeding
arising out of or in connection with any Company's conduct of the Business
prior to the Closing or any other conduct of any Company's officers,
directors, employees, stockholders, consultants, agents or advisors prior
to the Closing (including all Liabilities relating to or arising out the
actions listed on Schedule 7.14(a) and Schedule 7.17(e), whether or not
---------------- ----------------
disclosed on the Schedules hereto, notwithstanding that the date on which
any such Proceeding with respect thereto is commenced or made is after the
Closing;
(xi) any Liability of any Company for severance pay or the like
with respect to any employee of any Company that does not accept employment
with the Purchaser upon completion of the transaction contemplated by this
Agreement;
(xii) any Liability relating to a contractual obligation of any
Company, whether written or oral, for bonuses or like payments to any
director, officer or employee of any Company for the period ending on or
prior to the Closing other than normal salary payments or accruals in the
ordinary course of business and properly included as accrued expenses on
the Latest Balance Sheet;
(xiii) any Liability relating to any Employee Benefit Plan,
except for post-Closing Liabilities relating to the Health Plan;
(xiv) any Liability relating to vacation for the Hired Employees
earned or accrued as of the Closing Date;
(xv) any Liability of any Company for worker's compensation
based on an event occurring prior to the Closing Date;
(xvi) any Liability of any Company which relates to the
Excluded Assets; and
(xvii) any other Liability of any Company not expressly assumed
by the Purchaser under Section 2.1 (including any Liabilities arising out
-----------
of transactions entered into at or prior to the Closing, any action or
inaction at or prior to the Closing, any damage, accident, injury or death
occurring prior to the Closing or any state of facts existing at or prior
to the Closing, regardless of when asserted, which are not expressly
described in Section 2.2).
-----------
(b) For convenience of reference, the Liabilities of each Company
which are not included in the Assumed Liabilities and are not being assumed by
the Purchaser pursuant to Section 2.1 are collectively called the "Excluded
----------- --------
Liabilities" in this Agreement. The Companies and the Shareholders acknowledge
- -----------
and agree that they are retaining all of the Excluded Liabilities and will pay,
discharge and perform all of the Excluded Liabilities promptly when and as the
same become due and payable.
12
<PAGE>
2.3 Instrument of Assumption.
------------------------
At the Closing, the Purchaser shall execute and deliver to each Company an
assumption agreement in substantially the form of Exhibit B (the "Assumption
--------- ----------
Agreement").
- ---------
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price.
--------------
The aggregate consideration to be paid by the Purchaser to the Companies,
collectively, for the Purchased Assets shall be the sum of the following (such
sum being called the "Purchase Price" herein):
--------------
(a) $25,050,000 (as the same may be adjusted pursuant to Article VI,
----------
the "Cash Portion") payable in cash; plus
------------- ----
(b) $1,346,000 (as the same may be adjusted pursuant to Article V,
---------
the "Note Portion") payable in the form of one or more unsecured subordinated
-------------
notes of the Purchaser (collectively, the "Seller Notes") in an aggregate
------------
principal amount equal to the Note Portion, each Seller Note to be in
substantially the form of Exhibit C (provided, however, that the Note Portion
--------- -------- -------
shall be subject to adjustment after the Closing, if at all, pursuant to Article
-------
V); plus
- -- ----
(c) $6,000,000 (the "Pacer Shares Portion") payable in the form of
--------------------
300,000 newly issued shares (the "Pacer Shares") of common stock, no par value
------------
per share, of Pacer International, Inc., a Tennessee corporation and the sole
stockholder of the Purchaser ("Pacer"), which Pacer Shares the parties agree for
-----
purposes of this Agreement shall have an aggregate value equal to the Pacer
Shares Portion; plus
----
(d) the Assumed Liabilities, which shall have an aggregate value (the
"Assumed Liabilities Portion") equal to the sum of the amounts ascribed to the
---------------------------
Assumed Liabilities in the Statement of Allocation referred to in Section 3.3.
-----------
3.2 Payment at Closing.
------------------
At the Closing, the Purchaser shall pay or deliver the Purchase Price to
the Companies as follows:
(a) the Cash Portion by wire transfer of immediately available funds
to the account or accounts designated by the Companies to the Purchaser in
writing not later than three (3) Business Days prior to the Closing Date;
(b) the Note Portion by the Purchaser's execution and delivery to the
Companies of one or more Seller Notes in an aggregate principal amount equal to
the Note Portion (each such Seller Note to be issued and delivered to each
Company in the principal amount designated by the Companies to the Purchaser in
writing not later than three (3) Business Days prior to the Closing Date);
13
<PAGE>
(c) the Pacer Shares Portion by the Purchaser's delivery to the
Companies of one or more certificates representing the Pacer Shares duly
executed and issued by Pacer (each such certificate to be issued and delivered
to each Company representing that number of Pacer Shares designated by the
Companies to the Purchaser in writing not later than three (3) Business Days
prior to the Closing Date); and
(d) the Assumed Liabilities Portion by the Purchaser's execution and
delivery to the Companies of the Assumption Agreement pursuant to Section 2.3.
-----------
3.3 Allocation of the Purchase Price to the Purchased Assets.
--------------------------------------------------------
(a) The Purchase Price shall be allocated to the Purchased Assets by
the Purchaser as soon as practicable after the Closing and the final
determinations hereunder of the Final Net Working Capital and the 1999 Adjusted
EBIT, and if applicable, the 2000 Adjusted EBIT. Such allocation shall be made
in accordance with Section 1060 of the Code and the regulations promulgated
thereunder, and shall be set forth on a statement delivered by the Purchaser to
the Sellers (the "Statement of Allocation"). In connection with the foregoing,
-----------------------
but solely for the purposes of this Section 3.3, the parties agree that the fair
-----------
market value of those Purchased Assets that constitute property, plants and
equipment is equal to $586,000 and the Statement of Allocation shall be prepared
consistent therewith. As soon as practicable following the delivery of the
Statement of Allocation, each Company shall:
(i) complete and execute a Form 8594 Asset Acquisition
Statement Under Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), consistent with the Statement of Allocation;
(ii) deliver a copy of such form to the Purchaser; and
(iii) file a copy of such form with its respective Tax Returns,
as the case may, for the period which includes the Closing Date.
(b) Each of the parties hereto agrees (i) to file all Federal, state,
local and foreign Tax Returns consistent with the Statement of Allocations and
(ii) to not take any position that is contrary to the Statement of Allocations
with any Tax authority.
ARTICLE IV
THE CLOSING
The closing (the "Closing") of the transactions contemplated by this
-------
Agreement shall take place at the offices of O'Sullivan, Graev & Karabell, LLP,
counsel for the Purchaser, at the address set forth in Section 14.7, on January
------------
3, 2000, or such other place or later date as shall be mutually agreed upon by
the parties (the "Closing Date"), provided that all of the conditions set forth
------------
in Article X have been satisfied or waived (other than those conditions which by
---------
their terms are intended to be satisfied at the Closing).
14
<PAGE>
ARTICLE V
POST-CLOSING ADJUSTMENT OF NOTE PORTION
5.1 Adjustment Based on 1999 Adjusted EBIT.
--------------------------------------
(a) Delivery of 1999 Income Statement. As soon as practicable after
---------------------------------
the Closing Date, the Purchaser shall prepare and deliver to the Companies (i) a
combined statement of operations (the "1999 Income Statement") for the Companies
---------------------
for the period from (and including) January 1, 1999, through (and including)
December 31, 1999, and (ii) a certificate from an executive officer of the
Purchaser setting forth the Purchaser's calculation of the 1999 Adjusted EBIT
(as defined on and computed in accordance with Annex II). The 1999 Income
--------
Statement shall be prepared in accordance with GAAP applied on a basis
consistent with the preparation of the Audited Balance Sheet. The certificate
deliverable by the Purchaser to the Companies pursuant to clause (ii) of the
first sentence of this Section 5.1(a) is called the "Purchaser's 1999 Income
-------------- -----------------------
Certificate" in this Agreement.
- -----------
(b) Review and Final Determination of 1999 Adjusted EBIT. The
----------------------------------------------------
Companies shall be entitled to review and, if applicable, object to the 1999
Income Statement and the Purchaser's 1999 Income Certificate for a period of
forty-five (45) days following the Companies' receipt of the same. The 1999
Income Statement and the 1999 Adjusted EBIT set forth in the Purchaser's 1999
Income Certificate shall become final and binding upon the parties hereto on the
forty-sixth day following delivery thereof to the Companies unless the Companies
give written notice to the Purchaser of their disagreement therewith (a "Section
-------
5.1 Notice of Disagreement") prior to such date. Any Section 5.1 Notice of
- --------------------------
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. If a timely Section 5.1 Notice of Disagreement is received by the
Purchaser, then the 1999 Income Statement and the 1999 Adjusted EBIT set forth
in the Purchaser's 1999 Income Certificate (as revised in accordance with clause
(x) or (y) below) shall become final and binding upon the parties hereto on the
earlier of (x) the date on which the Purchaser and the Companies' resolve in
writing any differences they have with respect to any and all matters specified
in the Section 5.1 Notice of Disagreement or (y) the date on which any and all
matters in dispute are finally resolved in writing by such independent "Big 5"
public accounting firm as shall be agreed upon by the Purchaser and the
Companies in writing or, if the Purchaser and the Companies cannot so agree
within the forty-five-calendar day period referred to above, by lot from among
the remaining independent "Big 5" public accounting firms willing to act (but
excluding in any event PricewaterhouseCoopers LLP (the "Buyer's Accountants")
-------------------
and Kurosaki & Kinoshita (the "Sellers' Accountants")) (such independent public
--------------------
accounting firm being called the "Arbitrating Accountants" herein). The date on
-----------------------
which the 1999 Income Statement and the 1999 Adjusted EBIT so become final and
binding pursuant to this Section 5.1(b) is called the "Section 5.1 Final
-------------- -----------------
Determination Date." During the thirty (30) days immediately following the
- ------------------
delivery of any Section 5.1 Notice of Disagreement, the Purchaser and the
Companies shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such Section 5.1 Notice of
Disagreement. At the end of such thirty-day period, the Companies and the
Purchaser shall submit to the Arbitrating Accountants for their review and
resolution any and all matters which remain in dispute and which were included
in any Section 5.1 Notice of Disagreement as well as their respective
calculations of the 1999 Adjusted EBIT, in each case revised as such party deems
necessary or appropriate at the time of such submission. The parties shall each
use their
15
<PAGE>
respective commercially reasonable efforts to cause the Arbitrating Accountants
to reach a final, binding resolution of the matters which remain in dispute and
to provide their own calculation of the 1999 Adjusted EBIT, whereupon that
calculation of the 1999 Adjusted EBIT submitted to the Arbitrating Accountants
by either the Purchaser or the Companies that is closest to the Arbitrating
Accountants' calculation thereof shall be the final calculation of the 1999
Adjusted EBIT for all purposes of this Agreement. The Arbitrating Accountants'
resolution of such dispute and calculation of the 1999 Adjusted EBIT shall be
(i) in writing, (ii) furnished to the Purchaser and the Companies as soon as
practicable after the items in dispute have been referred to the Arbitrating
Accountants, (iii) made in accordance with this Agreement and (iv) in the
absence of manifest error or fraud, conclusive and binding upon the parties to
this Agreement. The 1999 Income Statement and the 1999 Adjusted EBIT, as
determined by the Arbitrating Accountants, shall become final and binding on the
parties hereto on the date the Arbitrating Accountants deliver their final
resolution to the parties. The parties shall endeavor in good faith to cause the
Arbitrating Accountants to so deliver their final determination within 180 days
after the Closing Date. Each party shall pay its own fees, costs and expenses
incurred in connection with the discussion and negotiation of any and all
disputes that may arise as to the 1999 Income Statement and the determination of
the 1999 Adjusted EBIT and in connection with any such arbitration; provided,
--------
however, that the fees and disbursements of the Arbitrating Accountants shall be
- -------
borne fifty percent (50%) by the Purchaser and fifty percent (50%) by the Seller
Group.
(c) Adjustment and Payment. Upon the final determination of the 1999
----------------------
Adjusted EBIT pursuant to this Section 5.1:
-----------
(i) if the 1999 Adjusted EBIT as finally determined pursuant to this
Section 5.1 is less than $5,391,000, then the Note Portion shall not be
-----------
adjusted and the Seller Notes issued at the Closing shall remain unchanged
and in full force and effect in accordance with their terms; or
(ii) if the 1999 Adjusted EBIT as finally determined pursuant to this
Section 5.1 is greater than $5,391,000, then the Note Portion shall be
-----------
increased pursuant to this Section 5.1(c)(ii) by six dollars ($6.00) for
------------------
each one dollar ($1.00) by which the 1999 Adjusted EBIT is greater than
$5,391,000 (provided, however, that the Note Portion shall not in any event
-------- -------
be increased by an amount greater than $3,654,000 (the "Maximum Aggregate
-----------------
Note Portion Adjustment") and the Note Portion shall not in any event
-----------------------
exceed an aggregate amount greater than $5,000,000), and the Purchaser
shall issue and deliver to each Company a new Seller Note dated as of the
Closing Date (with interest thereon calculated as of the Closing Date)
reflecting such increased Note Portion against receipt from such Company of
its original Seller Note issued at the Closing, for cancellation by the
Purchaser.
5.2 Adjustment Based on 2000 Adjusted EBIT.
--------------------------------------
If the 1999 Adjusted EBIT as finally determined pursuant to Section 5.1 is
-----------
equal to or greater than $6,000,000 (and the resulting increase in the Note
Portion pursuant to Section 5.1 equals $3,654,000), then the Note Portion shall
-----------
not be subject to any further adjustment and this Section 5.2 shall not be
-----------
applicable and shall have no force or effect. If the 1999 Adjusted EBIT as
finally determined pursuant to Section 5.1 is greater than $5,391,000 but less
-----------
than $6,000,000 (and the resulting increase in the Note Portion pursuant to
Section 5.1 is less than $3,654,000),
- -----------
16
<PAGE>
then the Note Portion shall be subject to further adjustment, if any, pursuant
to this Section 5.2. If this Section 5.2 goes into effect as contemplated by the
-----------
immediately preceding sentence, then during the fiscal year ending December 31,
2000, Pacer will not cause the Purchaser to take any material action that is
outside the ordinary course of business consistent with the past practice of the
Companies if such action would reasonably be expected to have a material adverse
effect on the 2000 Adjusted EBIT, unless (i) such action is consented to by
Keller acting for and on behalf of the Seller Group (which consent shall not be
unreasonably withheld or delayed), or (ii) reasonable and appropriate
modifications to account for such material adverse effect are made to the
computation of the 2000 Adjusted EBIT and the related provisions of this Section
5.2. Any action consented to or taken by Keller in his capacity as a shareholder
of Pacer or an officer or employee of the Purchaser shall be deemed to have been
consented to by Keller acting for and on behalf of the Seller Group for purposes
of this Section 5.2.
-----------
(a) Delivery of 2000 Income Statement. As soon as practicable after
---------------------------------
December 31, 2000, the Purchaser shall prepare and deliver to the Companies (i)
a statement of income (the "2000 Income Statement") for the Purchaser for the
---------------------
period from (and including) the Closing Date through (and including) December
31, 2000, and (ii) a certificate from an executive officer of the Purchaser
setting forth the Purchaser's calculation of the 2000 Adjusted EBIT (as defined
on and computed in accordance with Annex II). The 2000 Income Statement shall be
--------
prepared in accordance with GAAP applied on a basis consistent with the
preparation of the Audited Balance Sheet. The certificate deliverable by the
Purchaser to the Companies pursuant to clause (ii) of the first sentence of this
Section 5.2(a) is called the "Purchaser's 2000 Income Certificate" in this
- -------------- -----------------------------------
Agreement.
(b) Review and Final Determination of 2000 Adjusted EBIT. The
----------------------------------------------------
Companies shall be entitled to review and, if applicable, object to the 2000
Income Statement and the Purchaser's 2000 Income Certificate for a period of
forty-five (45) days following the Companies' receipt of the same. The 2000
Income Statement and the 2000 Adjusted EBIT set forth in the Purchaser's 2000
Income Certificate shall become final and binding upon the parties hereto on the
forty-sixth day following delivery thereof to the Companies unless the Companies
give written notice to the Purchaser of their disagreement therewith (a "Section
--------
5.2 Notice of Disagreement") prior to such date. Any Section 5.2 Notice of
- --------------------------
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. If a timely Section 5.2 Notice of Disagreement is received by the
Purchaser, then the 2000 Income Statement and the 2000 Adjusted EBIT set forth
in the Purchaser's 2000 Income Certificate (as revised in accordance with clause
(x) or (y) below) shall become final and binding upon the parties hereto on the
earlier of (x) the date on which the Purchaser and the Companies' resolve in
writing any differences they have with respect to any and all matters specified
in the Section 5.2 Notice of Disagreement or (y) the date on which any and all
matters in dispute are finally resolved in writing by the Arbitrating
Accountants. The date on which the 2000 Income Statement and the 2000 Adjusted
EBIT so become final and binding pursuant to this Section 5.2(b) is called the
--------------
"Section 5.2 Final Determination Date." During the thirty (30) days immediately
- -------------------------------------
following the delivery of any Section 5.2 Notice of Disagreement, the Purchaser
and the Companies shall seek in good faith to resolve in writing any differences
which they may have with respect to any matter specified in such Section 5.2
Notice of Disagreement. At the end of such thirty-day period, the Companies and
the Purchaser shall submit to the Arbitrating Accountants for their review and
resolution any and all matters which remain in dispute and which were included
in any Section 5.2 Notice of
17
<PAGE>
Disagreement as well as their respective calculations of the 2000 Adjusted EBIT,
in each case revised as such party deems necessary or appropriate at the time of
such submission. The parties shall each use their respective commercially
reasonable efforts to cause the Arbitrating Accountants to reach a final,
binding resolution of the matters which remain in dispute and to provide their
own calculation of the 2000 Adjusted EBIT, whereupon that calculation of the
2000 Adjusted EBIT submitted to the Arbitrating Accountants by either the
Purchaser or the Companies that is closest to the Arbitrating Accountants'
calculation thereof shall be the final calculation of the 2000 Adjusted EBIT for
all purposes of this Agreement. The Arbitrating Accountants' resolution of such
dispute and calculation of the 2000 Adjusted EBIT shall be (i) in writing, (ii)
furnished to the Purchaser and the Companies as soon as practicable after the
items in dispute have been referred to the Arbitrating Accountants, (iii) made
in accordance with this Agreement and (iv) in the absence of manifest error or
fraud, conclusive and binding upon the parties to this Agreement. The 2000
Income Statement and the 2000 Adjusted EBIT, as determined by the Arbitrating
Accountants, shall become final and binding on the parties hereto on the date
the Arbitrating Accountants deliver their final resolution to the parties. The
parties shall endeavor in good faith to cause the Arbitrating Accountants to so
deliver their final determination within 180 days after December 31, 2000. Each
party shall pay its own fees, costs and expenses incurred in connection with the
discussion and negotiation of any and all disputes that may arise as to the 2000
Income Statement and the determination of the 2000 Adjusted EBIT and in
connection with any such arbitration; provided, however, that the fees and
-------- -------
disbursements of the Arbitrating Accountants shall be borne fifty percent (50%)
by the Purchaser and fifty percent (50%) by the Seller Group.
(c) Note Portion Adjustments and Payment. Upon the final
------------------------------------
determination of the 2000 Adjusted EBIT pursuant to this Section 5.2:
------------
(i) if the 2000 Adjusted EBIT as finally determined pursuant to
this Section 5.2 is less than the greater of (x) $5,391,000 and (y) the
-----------
final 1999 Adjusted EBIT, then the Note Portion shall not be adjusted
pursuant to this Section 5.2 and the Seller Notes issued at the Closing (as
-----------
adjusted pursuant to Section 5.1, if applicable) shall remain unchanged and
-----------
in full force and effect in accordance with their original terms; or
(ii) if the 2000 Adjusted EBIT as finally determined pursuant to
this Section 5.2 is greater than the greater of (x) $5,391,000 and (y) the
-----------
final 1999 Adjusted EBIT, then the Note Portion shall be increased by six
dollars ($6.00) for each one dollar ($1.00) by which the final 2000
Adjusted EBIT is greater than $5,391,000 or the final 1999 Adjusted EBIT
(whichever is greater) (provided, however, that the Note Portion shall not
in any event be increased pursuant to this Section 5.2 to an aggregate
-----------
amount greater than $5,000,000), and the Purchaser shall issue and deliver
to each Company a new Seller Note dated as of the Closing Date (with
interest thereon calculated as of the Closing Date) reflecting such
increased Note Portion against receipt from such Company of its Seller Note
issued at the Closing (or thereafter pursuant to Section 5.1(c), if
--------------
applicable), for cancellation by the Purchaser.
(d) Adjustment Regarding Collections of Bad Debt. If after the
--------------------------------------------
adjustments, if any, of the Note Portion pursuant to Sections 5.1 and 5.2, the
------------ ---
final Note Portion is less than $5,000,000 (such deficiency being called the
"Note Portion Deficiency" in this Agreement), then the Purchaser shall use its
- ------------------------
commercially reasonable efforts during the period commencing on the
18
<PAGE>
date of the final determination of the 2000 Adjusted EBIT and ending on December
31, 2001, to collect from the applicable account debtors those specifically
identified accounts receivable of the Companies' that were written off as bad
debt against the Companies' combined income from operations at the time of, and
in connection with, the computation of the combined "Adjusted EBIT" of the
Companies for 1998 and the 1999 Adjusted EBIT and those specifically identified
accounts receivable of the Purchaser, if any, that were written off as bad debt
against the Purchaser's income from operations at the time of, and in connection
with, the computation of the 2000 Adjusted EBIT, and the Purchaser shall pay all
amounts collected in full or partial satisfaction of such accounts receivable
over to the Companies up to an aggregate amount equal to the Note Portion
Deficiency. If any account debtor of the Purchaser who is also an account debtor
with respect to any such accounts receivable makes any payment to the Purchaser
that is not specifically identified to any particular account receivable, such
payment shall be applied to the accounts receivable owing from such account
debtor in the Purchaser's reasonable discretion.
ARTICLE VI
POST-CLOSING WORKING CAPITAL ADJUSTMENT
6.1 Delivery of Closing Balance Sheet.
---------------------------------
As soon as practicable following the Closing Date, the Purchaser shall
prepare and deliver to the Companies a combined balance sheet (the "Closing
-------
Balance Sheet") of the Business reflecting the financial position of the
- -------------
Business as of the close of business on the Closing Date and a statement (the
"Final Net Working Capital Statement") setting forth the computation of the
- ------------------------------------
Final Net Working Capital as of the close of business on Closing Date, which
statement shall be prepared in accordance with GAAP applied on a basis
consistent with the Audited Balance Sheet (to the extent that GAAP was properly
applied), together with a notice (the "Purchaser's Notice of Adjustment")
--------------------------------
setting for its proposed adjustment, if any, of the Purchase Price as
contemplated hereby; provided, however, that assets, liabilities, gains, losses,
-------- -------
revenues and expenses in interim periods or as of dates other than year-end
(which normally are determined through the application of so-called interim
accounting conventions and procedures) will be determined, for purposes of the
Closing Balance Sheet, through full application of the conventions and
procedures used in preparing the Audited Balance Sheet, to the extent such
conventions or procedures were applied in accordance with GAAP. As used in this
Agreement, the "Final Net Working Capital" shall be determined in accordance
-------------------------
with this Section 6.1 and shall mean the total current assets minus the total
-----------
current liabilities of the Business set forth on the Closing Balance Sheet
(excluding the effect (including the Tax effect) of any act, event or
transaction occurring after the Closing on the Closing Date and not in the
ordinary course of the Business).
6.2 Review and Final Determination of Final Net Working Capital.
-----------------------------------------------------------
The Companies shall be entitled to review and, if applicable, object to the
Purchaser's Notice of Adjustment for a period of forty five (45) days following
the Companies' receipt of the same. The Purchaser's Notice of Adjustment shall
become final and binding upon the parties hereto on the forty-sixth day
following delivery thereof unless the Companies give written notice to the
Purchaser of their disagreement therewith (a "Working Capital Notice of
-------------------------
Disagreement") prior to such date. Any Working Capital Notice of Disagreement
- ------------
shall specify in reasonable
19
<PAGE>
detail the nature of any disagreement so asserted. If a timely Working Capital
Notice of Disagreement is received by the Purchaser, then the Final Net Working
Capital set forth therein (as revised in accordance with clause (x) or (y)
below) shall become final and binding upon the parties hereto on the earlier of
(x) the date on which the Purchaser and the Companies' resolve in writing any
differences they have with respect to any and all matters specified in the
Working Capital Notice of Disagreement or (y) the date on which any and all
matters in dispute are finally resolved in writing by the Arbitrating
Accountants. The date on which the Final Net Working Capital becomes final and
binding pursuant to this Section 6.2 is called the "Working Capital Final
---------------------
Determination Date." During the thirty (30) days immediately following the
- ------------------
delivery of any Working Capital Notice of Disagreement, the Purchaser and the
Companies shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such Working Capital
Notice of Disagreement. At the end of such thirty-day period, the Companies and
the Purchaser shall submit to the Arbitrating Accountants for their review and
resolution any and all matters which remain in dispute and which were included
in any Working Capital Notice of Disagreement as well as their respective
calculations of the Final Net Working Capital, revised as such party deems
necessary or appropriate at the time of such submission. The Arbitrating
Accountants shall be required to reach a final, binding resolution of the
matters which remain in dispute and provide their own calculation of the Final
Net Working Capital, whereupon that calculation of the Final Net Working Capital
submitted to the Arbitrating Accountants by either the Purchaser or the
Companies that is closest to the Arbitrating Accountants' calculation thereof
shall be the final calculation of the Final Net Working Capital. The Arbitrating
Accountants' resolution of such dispute and calculation of the Final Net Working
Capital shall be (a) in writing, (b) furnished to the Purchaser and the
Companies as soon as practicable after the items in dispute have been referred
to the Arbitrating Accountants, (c) made in accordance with this Agreement and
(d) in the absence of manifest error or fraud, conclusive and binding upon the
parties to this Agreement. The Final Net Working Capital, as determined by the
Arbitrating Accountants, shall become final and binding on the parties hereto on
the date the Arbitrating Accountants delivers their final resolution to the
parties. The parties shall endeavor in good faith to cause the Arbitrating
Accountants to so deliver their final determination within 180 days after the
Closing Date. Each party shall pay its own fees, costs and expenses incurred in
connection with the discussion and negotiation of any and all disputes that may
arise as to determination of the Final Net Working Capital; provided, however,
-------- -------
that the fees and disbursements of the Arbitrating Accountants shall be borne
fifty percent (50%) by the Purchaser and fifty percent (50%) by the Seller
Group.
6.3 Adjustment of Purchase Price; Payments.
--------------------------------------
(a) If the Final Net Working Capital is less than $4,630,000 (the
amount of such deficit being referred to herein as the "Overpayment Amount"),
------------------
then, within five (5) Business Days following the Working Capital Final
Determination Date, the Seller Group shall pay to the Purchaser, in cash, the
Overpayment Amount. The Cash Portion of the Purchase Price shall be deemed to be
decreased by the Overpayment Amount, if applicable.
(b) If the Final Net Working Capital is greater than $4,630,000 (the
amount of such excess being referred to herein as the "Underpayment Amount"),
-------------------
then subject to the following provisions of this Section 6.3(b), the Purchaser
--------------
shall pay such Underpayment Amount to the Seller Group, in cash, at the times
and in the manner contained in this Section 6.3(b). The Purchaser's obligation
--------------
to pay the Underpayment Amount to the Seller Group hereunder shall be
20
<PAGE>
subject to (i) the Purchaser collecting in full the accounts receivable of the
Companies reflected on the Closing Balance Sheet (with the Purchaser's
collections of any accounts receivable classified as "bad debt" being credited
to such collections of accounts receivable for purposes of this clause (i)) and
(ii) the Purchaser not having assumed from the Companies as of the Closing Date
or otherwise becoming liable for any additional accounts payable or accrued
expenses or other current liabilities existing as of the Closing Date and not
reflected on the Closing Balance Sheet. Subject to the immediately preceding
sentence, as promptly as practicable after the Purchaser has collected that
portion of the accounts receivable of the Companies reflected on the Closing
Balance Sheet that results in the Purchaser having realized net working capital
as of the Closing of $4,630,000, the Purchaser shall pay over to the Seller
Group amounts subsequently collected on the remaining accounts receivable of the
Companies that are reflected on the Closing Balance Sheet. The Cash Portion of
the Purchase Price shall be deemed to be increased by the amount of the
Underpayment Amount actually paid to the Seller Group hereunder.
(c) If the Final Net Working Capital is equal to $4,630,000 then no
adjustment to the Purchase Price shall be made, and neither the Seller Group nor
the Purchaser shall be obligated to make any payment to the other under this
Section.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
OF THE SELLER GROUP
Each of the Companies, the Shareholders, Keller and Uchida jointly and
severally represents and warrants to the Purchaser as set forth below.
7.1 Organization, Power, Authority and Good Standing.
------------------------------------------------
Each Company is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its assets and properties and to carry on its business as presently conducted.
Each Company is duly qualified and in good standing to transact business as a
foreign Person in those jurisdictions set forth on Schedule 7.1, which
------------
constitute all the jurisdictions in which the character of the property owned,
leased or operated by such Company or the nature of the business or activities
conducted by such Company makes such qualification necessary. The Purchaser has
been furnished with true, correct and complete copies of the Charter Documents
of each Company, in each case as amended and in effect on and as of the date
this representation is being made and is deemed made hereunder. Except as set
forth on Schedule 7.1, no Company has (a) engaged in any business or activity
------------
other than the Business or (b) used within the last five (5) years any trade
name or assumed names other than its corporate name set forth in the caption to
this Agreement.
7.2 Authority; Authorization, Execution and Delivery; Enforceability.
----------------------------------------------------------------
(a) Each Company has all requisite power and authority (corporate or
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. Each Company's execution and
delivery of this Agreement and each Related Document
21
<PAGE>
to which it is or will be a party, and the performance by such Company of its
obligations hereunder and thereunder, have been duly and validly authorized by
all requisite action on the part of such Company (including its Board of
Directors and all committees thereof and its shareholders). Each of this
Agreement and the Related Documents to which each respective Company is or will
be a party has been, or upon such Company's execution thereof will be, duly and
validly executed and delivered by such Company and constitutes, or upon such
Company's execution and delivery thereof will constitute, the valid and binding
obligation of such Company, enforceable against such Company in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally, and, as to enforceability, to general principals of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(b) Except as set forth on Schedule 7.2, neither the execution and
------------
delivery by any Company of, nor the performance of their obligations under, this
Agreement and each Related Document to which they are or will be a party, nor
the consummation by any Company of the transactions contemplated hereby or
thereby, nor the compliance by any Company with any of the provisions hereof and
thereof, will (i) conflict with, or result in any violation of, or cause a
default (with or without notice or lapse of time or both) under, any provision
of any Company's Charter Documents, (ii) conflict with, or result in any
violation of, or cause a 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, any term, condition or provision of any provision of any Contract to
which any Company is a party, or by which any Company or its assets may be
bound, or (iii) violate any Law applicable to any Company.
7.3 Consents.
--------
Except as set forth on Schedule 7.3, no Permit, authorization, consent or
------------
approval of or by, or notification of or filing with, any Person (governmental
or otherwise) is required for, or as a result of, any Company's execution,
delivery and performance of this Agreement and the Related Documents to which
they are or will be a party and the consummation of the transactions
contemplated hereby or thereby (including the Financing).
7.4 Capitalization.
--------------
The authorized capital stock of each Company is set forth on Schedule 7.4,
------------
which schedule also sets forth the total number of outstanding shares of each
Company. All such outstanding shares disclosed on Schedule 7.4 are duly and
------------
validly issued and outstanding, fully paid and non-assessable, with no personal
Liability attached to the ownership thereof, and are held of record and
beneficially by the Shareholders in the respective amounts set forth on such
Schedule 7.4, without Encumbrance. Except as set forth on Schedule 7.4, there
- ------------ ------------
are no Contracts, commitments, arrangements, understandings or restrictions
relating in any way to any shares of capital stock or other securities of any
Company, including voting trusts or other similar agreements or understandings
with respect to the voting of any Company's capital stock or share capital, to
which any Company, the Shareholders or any other Person is bound.
22
<PAGE>
7.5 Subsidiaries; Investments.
-------------------------
Except as set forth on Schedule 7.5, no Company owns or holds, directly or
------------
indirectly, any equity interest or debt obligation (excluding accounts
receivable arising in the ordinary course of the Business, consistent with past
practice) of any other Person.
7.6 Financial Information.
---------------------
(a) Schedule 7.6 attached hereto contains (or, in the case of the
------------
Audited Financial Statements referred to in Section 7.6(a)(ii), as of the
------------------
Closing will contain) (i) true, correct and complete copies of the following:
(i) the unaudited combined balance sheet of the Companies
as of December 31, 1997, including any and all footnotes thereto (the
foregoing being hereinafter called the "Unaudited Historical Financial
------------------------------
Statement");
---------
(ii) the audited combined balance sheet of the Companies as
of December 31, 1998 (the "Audited Balance Sheet"; and such date being the
---------------------
"Audited Balance Sheet Date"), and the related audited combined statements
---------------------------
of income, stockholders' equity and cash flows of the Companies for the
fiscal years then ended, including the footnotes thereto, as audited by
PricewaterhouseCoopers, LLP (all of foregoing, together with the report of
such audit, being hereinafter collectively called the "Audited Financial
-----------------
Statements");
----------
(iii) the unaudited combined balance sheet of the Companies
as of September 30, 1999 (the "Latest Balance Sheet"; and such date being
--------------------
the "Latest Balance Sheet Date"), and the unaudited combined statements of
--------------------------
income of the Companies for the fiscal year-to-date period then ended,
including any and all footnotes thereto (all of the foregoing, including
the Latest Balance Sheet, being hereinafter collectively referred to as the
"Unaudited Latest Financial Statements"; and the Unaudited Historical
-------------------------------------
Financial Statement, the Audited Financial Statements and the Unaudited
Latest Financial Statements collectively, the "Financial Statements"); and
--------------------
(iv) the unaudited pro forma combined balance sheet of the
Companies as of September 30, 1999, which gives effect to the purchase of
the Purchased Assets and the assumption of the Assumed Liabilities as if
completed on September 30, 1998, and the unaudited pro forma combined
Statements of Operations of the Companies for the year ended December 31,
1998, and for the nine-month period ended September 30, 1999, each of which
gives effect to the purchase of the Purchased Assets and the assumption of
the Assumed Liabilities as if completed on January 1, 1998 (collectively,
the "Pro Forma Statements").
--------------------
(b) The Financial Statements (i) are true, complete and correct, (ii)
fairly present the combined financial position of the Companies as of the dates
indicated and the combined results of operations of the Companies for the
periods indicated, (iii) are in accordance with the books and records of the
Companies, which have been maintained in a manner consistent with historical
practice, and (iv) have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby (subject in the case of the
Unaudited Historical Financial
23
<PAGE>
Statement and the Unaudited Latest Financial Statements to (A) the absence of
any footnotes that may be required by GAAP and (B) normal year-end adjustments
that are not material individually or in the aggregate).
(c) The Pro Forma Statements (i) are true, complete and correct, (ii)
fairly present the combined results of operations of the Companies for the
periods indicated on such pro forma basis, (iii) are in accordance with the
books and records of the Companies, which have been maintained in a manner
consistent with historical practice, and (iv) have been prepared in accordance
with GAAP consistently applied throughout the period covered thereby.
(d) Schedule 7.6 attached hereto also contains a true, correct and
------------
complete summary of all accounts payable, accrued expenses and accounts
receivable of the Company and its Subsidiaries as of the most recent practicable
date prior to the date hereof, which schedule sets 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 such account debtor or owing to such
account creditor (identifying the portion of such amount that is current, 30,
60, 90 and more than 90 days past due).
7.7 Absence of Undisclosed Liabilities.
----------------------------------
Except as disclosed on Schedule 7.7, no Company has any Liability except
------------
(a) to the extent expressly reflected or reserved against on the Latest Balance
Sheet, (b) Liabilities under Contracts (except resulting from any breach or
violation thereof or default thereunder) and (c) Liabilities incurred in the
ordinary course of business consistent with past practice since the Latest
Balance Sheet Date (other than any such Liability arising from any breach or
violation of, or default under, any contract, or arising from any breach of
warranty, tort, infringement, or violation of any Law or Proceedings). 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 any Company which are not adequately provided for or
disclosed on the Latest Balance Sheet or in the notes thereto. No Company has,
either expressly or by operation of Law, assumed or undertaken any Liability of
any other Person, including any obligation for corrective or remedial action
relating to Environmental, Health and Safety Laws.
7.8 Absence of Changes.
------------------
Since the Latest Balance Sheet Date, except as set forth on Schedule 7.8,
------------
each Company has been operated in the ordinary course of business, consistent
with past practice, and there has not been:
(a) any event or condition which has resulted in or could reasonably
be expected to result in an adverse change in the business, operations, assets,
condition (financial or otherwise), operating results, liabilities, relations
with employees, customers or suppliers, or prospects of any Company, or any
casualty loss or damage to the assets of any Company, whether or not covered by
insurance (a "Material Adverse Change");
-----------------------
(b) any declaration, setting aside or payment of any distribution
with respect to any shares of capital stock of any Company, or any direct or
indirect redemption, purchase or
24
<PAGE>
other acquisition of any thereof, or any other payments of any nature directly
or indirectly to or for the benefit of any Shareholder or Affiliate of any
Company (whether or not on or with respect to any shares of capital stock of
such Company owned by such Shareholder or Affiliate) other than salaries and
benefits paid in the usual and ordinary course of business;
(c) any general uniform increase in the compensation of employees
(including any increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) of any Company, or any increase in or prepayment of any such
compensation payable or to become payable to any officer, director or key
employee;
(d) any acquisition or disposition of assets or properties other than
the sale or other disposition of inventories for fair value in the ordinary
course of business;
(e) any agreement or commitment on the part of any Company to merge,
amalgamate or consolidate with or into, or otherwise acquire, any other Person
or division thereof;
(f) any change in depreciation or amortization policies or rates
previously adopted, any change in income or expense recognition or bad debt
reserve, write-down or write-off policies previously adopted, any write-up or
write-down of inventory or other assets or any other change in other accounting
or in tax reporting or methods or practices followed by any Company;
(g) any change in the manner in which products or services of any
Company is marketed (including any change in prices), any change in the manner
in which any Company extends discounts or credit to customers or any change in
the manner or terms by which any Company collects accounts receivable;
(h) any failure by any Company to make scheduled capital expenditures
or investments or any failure to pay trade accounts payable or any other
Liability of such Company when due; or
(i) any agreement (other than this Agreement and the Related
Agreements), whether in writing or otherwise, to take any of the actions
specified in the foregoing clauses (a) through (i).
7.9 Tax Matters.
-----------
(a) Except as set forth on Schedule 7.9(a), each Company and each
---------------
other Person included in any consolidated or combined Tax Return and part of an
affiliated group, within the meaning of Section 1504 of the Code of which any
Company is or has been a member:
(iii) has timely paid or caused to be paid all Taxes required to
be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return);
(i) has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns required
to be filed by it with the
25
<PAGE>
appropriate Governmental Entities in all jurisdictions in which such Tax
Returns are required to be filed; and
(ii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return
has not since been filed.
(b) Each Company has previously delivered to the Purchaser true,
correct and complete copies of all Tax Returns filed by or on behalf of such
Company for all completed Tax years of such Company that remain open for audit
or review by the relevant Taxing authority. All such Tax Returns were complete
and correct.
(c) Except as set forth in Schedule 7.9(c):
---------------
(iv) no Company has been notified by the Internal Revenue Service
or any other Taxing authority that any issues have been raised (and no
such issues are currently pending) by the Internal Revenue Service or any
other Taxing authority in connection with any Tax Return of such Company,
there are no pending Tax audits and no waivers of statutes of limitations
have been given or requested with respect to such Company;
(v) full and adequate provision has been made (A) on the Latest
Balance Sheet for all Taxes payable by each Company for all periods ending
on or prior to the Latest Balance Sheet Date, and (B) on the books and
records of each Company for all Taxes payable by such Company for all
periods beginning on or after the Latest Balance Sheet Date;
(vi) no Company has incurred any Tax Liability from and after the
Latest Balance Sheet Date other than Taxes incurred in the ordinary course
of business consistent with previous years and past practices;
(vii) no Company (A) is, and has made an election to be treated
as, a "consenting corporation" under Section 341(f) of the Code and (B)
is, and has been, a "personal holding company" within the meaning of
Section 542 of the Code;
(viii) the Company has complied in all respects with all applicable
Laws relating to the collection or withholding of Taxes (such as sales
Taxes or withholding of Taxes from the wages of employees);
(ix) no Company is, and has ever been, a party to any Tax
sharing, indemnity or similar agreement with any Person;
(x) no Company has incurred any Liability to make or possibly
make any payments, either alone or in conjunction with any other payments,
that:
(A) are non-deductible under, or would otherwise
constitute a "parachute payment" within the meaning of, Section 280G
of the Code (or any corresponding provision of state, local or
foreign income Tax Law) or
(B) are or may be subject to the imposition of an
excise Tax under Section 4999 of the Code;
26
<PAGE>
(viii) no Company has agreed to, and is not required to, make any
adjustments or changes either on, before or after the Closing Date, to its
accounting methods pursuant to Section 481 of the Code, and the Internal
Revenue Service has not proposed any such adjustments or changes in the
accounting methods of any Company;
(ix) no claim has ever been made by any Taxing authority in a
jurisdiction in which the Company does not file Tax Returns that the
Company is or may be subject to taxation by that jurisdiction;
(x) each Company has made an election under the provisions of
Section 1362(a) of the Code to be taxed as an S Corporation and each of
Conex, MSL and Jupiter, since April 1, 1990, February 16, 1996 and June 1,
1998, respectively, has been and each Company continues to be, taxed as an
S Corporation for federal income tax purposes for each of such taxable
periods and has made a corresponding election under the Tax laws of each
of the states in which it does business for each of such taxable years,
and such elections have been accepted and not challenged by the Internal
Revenue Service or any other Taxing authority; and/1/
(xi) no Company is a foreign Person within the meaning of Section
1.1445-2(b) of the rules and regulations promulgated under Section 1445 of
the Code, and the Purchaser has been furnished with a true and accurate
certificate from each Company so stating which complies in all respects
with Section 1.1445-2(b)(1) of such rules and regulations.
7.10 Title to Assets, Properties and Rights and Related Matters.
----------------------------------------------------------
(a) The Companies have good and marketable title (or a valid
leasehold interest) to all of the assets, properties and interests in
properties, real, personal or mixed, reflected on the Latest Balance Sheet or
acquired after the Latest Balance Sheet Date (except for property sold or
otherwise disposed of since the Latest Balance Sheet Date in the ordinary course
of business and accounts receivable and notes receivable paid in full subsequent
to the Latest Balance Sheet Date in the ordinary course of business), free and
clear of all Encumbrances, of any kind or character, except for those
Encumbrances set forth on Schedule 7.10 and Permitted Encumbrances. Such assets
-------------
are in good operating condition and repair (normal wear and tear excepted), are
sufficient to operate the Business as presently conducted and as presently
proposed to be conducted, are suitable for the uses for which they are used in
the Business, are not subject to any condition which materially interferes with
the economic value or use thereof. With respect to any leased assets, such
assets are in such condition as to permit the surrender thereof to the lessors
thereunder on the date hereof without any cost or expense for repair or
restoration as if the related leases were terminated on the date hereof in the
ordinary course of business. All tangible personal property is located on the
premises of the Companies listed on Schedule 7.11(a).
----------------
__________________
/1/ S corporation status of each Company to be confirmed by Keller.
27
<PAGE>
7.11 Real Property-Owned or Leased.
-----------------------------
(a) Schedule 7.11(a) contains a list of all of the real property
----------------
owned, leased, subleased or otherwise occupied by the Companies. The description
of each parcel of real property subject to one or more leases (the "Leased
------
Property") includes the names of the lessor and the lessee and the basic terms
thereof. The lease rate charged to each Company for each parcel of Leased
Property that is leased by such Company from an Affiliate is not greater than
the fair market value rental that would be obtained by such Company in an arms'
length transaction with an unaffiliated third party. Such real property listed
on Schedule 7.11(a) constitutes all real property used or occupied by the
----------------
Companies in connection with the Business.
(b) With respect to the real property, except as set forth on
Schedule 7.11(b):
- ----------------
(xi) no portion thereof is subject to any pending condemnation
Proceeding or Proceeding by any public or quasi-public authority and, to
the Best Knowledge of the Companies, there is no threatened condemnation
or Proceeding with respect thereto;
(xii) the physical condition of the property is sufficient to
permit the continued conduct of the Business as presently conducted and as
presently proposed to be conducted, subject to the provision of usual and
customary maintenance and repair performed in the ordinary course with
respect to similar properties of like age and construction;
(xiii) the Companies are the fee owner or owner and holder of all
the leasehold estates purported to be granted by such leases, as
applicable;
(xiv) there are no Contracts, written or oral, to which the
Companies or any of their respective Affiliates is a party, granting to
any party or parties the right of use or occupancy of any portion of real
property;
(xv) there are no parties (other than the Companies) in
possession of the real property; and
(xvi) no notice of any increase in the assessed valuation of any
real property and no notice of any contemplated special assessment has
been received by any Company, and to the Best Knowledge of the Companies,
there is no threatened increase in assessed valuation or threatened
special assessment pertaining to any real property.
7.12 Intellectual Property.
---------------------
(a) Except in each case as set forth on Schedule 7.12(a):
----------------
(i) each Company owns, has the right to use, sell,
license and dispose of, and has the right to bring actions for the
infringement of, all Intellectual Property Rights used in, necessary or
required for the conduct of the Business as presently conducted
(collectively, the "Owned Requisite Rights"), other than those
---------------------
Intellectual Property Rights for which such Company has a valid license,
all of which are listed on Schedule 7.12(a) (collectively, the "Licensed
--------
Requisite Rights"; and together with the Owned Requisite Rights, the
----------------
"Requisite Rights"), and such rights to use, sell, license, dispose of
----------------
28
<PAGE>
and bring actions are exclusive with respect to the Owned Requisite Rights
(including the names "Conex", "MSL" and "Jupiter");
(ii) no Company has granted any Person the right to use
any of the Owned Requisite Rights;
(iii) each Company has taken all commercially reasonable
and practicable steps designed to safeguard and maintain (A) the secrecy
and confidentiality of confidential or proprietary information and (B) the
proprietary rights of such Company in all of its Requisite Rights;
(iv) no Company has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property Rights of any Person or committed any acts of unfair competition
or received from any Person in the past five years any notice, charge,
complaint, claim or assertion thereof, and no such claim is impliedly
threatened by an offer to license from another Person; and
(v) no Company has sent to any Person in the past five
years, or otherwise communicated to any Person, any notice, charge,
complaint, claim or other assertion of any present, impending or
threatened infringement by or misappropriation of, or other conflict with,
any Intellectual Property Rights of such Company by such other Person or
any acts of unfair competition by such other Person, nor, to the Best
Knowledge of the Companies, is any such infringement, misappropriation,
conflict or act of unfair competition occurring or threatened.
(b) Schedule 7.12(b) contains a true and complete list of all
----------------
applications, filings and other formal actions made or taken pursuant to any
Laws by each Company to perfect or protect their respective interests in its
Intellectual Property Rights, including all patents, patent applications,
trademarks, trademark applications, service marks and service mark applications.
7.13 Agreements, No Defaults, Etc.
-----------------------------
(a) Schedule 7.13(a) contains a true and complete list and brief
----------------
description of all Contracts to which each Company is a party and (x) which were
entered into or made outside the ordinary course of business, consistent with
past practice, or (y) which were entered into or made in the ordinary course of
business, consistent with past practice, and are described in Section 7.13(a)(i)
------------------
through (xiii). Except as set forth on Schedule 7.13(a), no Company is a party
------ ----------------
to any of the following Contracts:
(i) distributorship, dealer, sales, advertising, agency,
manufacturer's representative or other Contract relating to the payment of
a commission;
(ii) Contract for the employment of any officer, employee
or consultant or any other type of Contract or understanding with any
officer, employee or consultant, including any agreement or understanding
relating to severance payments;
(iii) indenture, mortgage, promissory note, loan agreement,
pledge agreement, conditional sale, guaranty or other Contract for the
borrowing of money, for a line of credit or for a Capital Lease;
29
<PAGE>
(iv) Contract for charitable contributions in excess of
$5,000 individually or $10,000 in the aggregate;
(v) Contract for capital expenditures in excess of
$10,000 individually or $50,000 in the aggregate;
(vi) agreement or arrangement for the sale of any assets,
properties or rights other than the sale of services or products in the
ordinary course of business at normal profit margins;
(vii) lease or other agreement pursuant to which it is a
lessee of or holds or operates any machinery, equipment, motor vehicles,
office furniture, fixtures, products, merchandise or other personal
property owned by any other Person with a value in excess of $10,000
individually or $50,000 in the aggregate;
(viii) Contract with respect to the lending or investing of
funds;
(ix) Contract with respect to any form of intangible
property, including any Intellectual Property Rights;
(x) Contract which restricts any Company from engaging in
any aspect of the Business or any other business anywhere in the world;
(xi) Contract or group of related Contracts with the same
Person or group of Affiliated Persons (excluding purchase orders entered
into in the ordinary course of business which are to be completed within
three months of entering into such purchase orders) for the purchase or
sale of products or services under which the undelivered or unperformed
balance or portion thereof (including the aggregate undelivered or
unperformed balance or portion under any such Contracts between the same
Person and the Company) has a selling price in excess of $50,000;
(xii) agreement for the acquisition or disposition of a
Person or a division of a Person made within the preceding five years
(whether or not such acquisition or disposition was consummated); or
(xiii) other Contract material to the Business.
(b) The Contracts disclosed on Schedule 7.4, the leases (and any
------------
other Contracts) disclosed on Schedule 7.11(a), the licenses (and any other
----------------
Contracts) disclosed on Schedule 7.12(a), the insurance policies (and any other
----------------
Contracts) disclosed on Schedule 7.16(a), the Company Employee Plans (and any
----------------
other Contracts) disclosed on Schedule 7.18(a) and the Contracts disclosed on
----------------
Schedule 7.21 are incorporated by reference onto Schedule 7.13(a), and the
- ------------- ----------------
Contracts described in Section 7.13(a) together with the other Contracts so
---------------
incorporated by reference onto Schedule 7.13(a) are collectively called the
----------------
"Material Contracts."
------------------
(c) All Material Contracts are in full force and effect, constitute
legal, valid and binding obligations of the respective Company party thereto and
to the Best Knowledge of the Companies the other parties thereto, and are
enforceable in accordance with their terms against the respective Company party
thereto and to the Best Knowledge of the Companies against the
30
<PAGE>
other parties thereto, in each case subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally, and, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). Each Company has performed all of the obligations required to be
performed by it to date, and there exists no default, or any event which upon
the giving of notice or the passage of time, or both, would give rise to a claim
of a default in the performance by the respective Company party thereto or to
the Best Knowledge of the Companies any other party to any of the Material
Contracts of their respective obligations thereunder. The Purchaser has been
furnished with true, complete and correct copies of all written Material
Contracts and Schedule 7.13(a) (including by incorporated reference) contains
----------------
complete descriptions of all oral items listed on Schedule 7.13(a) (including by
----------------
incorporated reference).
(d) Schedule 7.13(d) contains a true and complete list of all Funded
----------------
Indebtedness of the Companies, all of which is to be repaid in full on or prior
to the Closing Date, in each case showing the aggregate principal amount thereof
(and the aggregate amount of any undrawn commitments with respect thereto), the
name of the lender and the name of the respective borrower and any other Person
which directly or indirectly guaranteed such debt.
7.14 Litigation, Etc.
----------------
(a) Except as disclosed on Schedule 7.14(a) and except for workers'
----------------
compensation claims made in the ordinary course of business and consistent (in
frequency and cost) with past practices, there are no (i) Proceedings pending
or, to the Best Knowledge of the Companies, threatened against any Company,
whether at law or in equity, whether civil or criminal in nature or before or by
any Governmental Entity or arbitrator, nor, to the Best Knowledge of the
Companies, does there exist any basis therefor, or (ii) Orders of any
Governmental Entity or arbitrator with respect to, involving or against any
Company. Each Company has delivered to the Purchaser all material documents and
correspondence relating to such matters referred to on Schedule 7.14(a).
----------------
(b) Schedule 7.14(b) lists each matter that (i) resulted in any
----------------
criminal sanctions against any Company or (ii) was in existence within the last
five years and resulted in payments in excess of $10,000 by any Company (whether
as a result of a judgment, civil fine, settlement or otherwise).
7.15 Compliance with Laws.
--------------------
Each Company (a) has complied, and is in compliance, with all Laws, Orders
and Permits applicable to it and the Business and (b) has all Permits used or
necessary in the conduct of the Business. Such Permits are listed on Schedule
--------
7.15 and are in full force and effect, no violations with respect to any thereof
- ----
have occurred or are or have been recorded, no Proceeding is pending or, to the
Best Knowledge of the Companies, threatened to revoke or limit any thereof. No
investigation or review by any Governmental Entity with respect to any Company
is pending or, to the Best Knowledge of the Companies, threatened, nor has any
Governmental Entity notified any Company of its intention to conduct the same.
To the Best Knowledge of the Companies, there is no proposed change in any
applicable Law which would require any Company to obtain any Permits not set
forth on Schedule 7.15 in order to conduct the Business as presently conducted
-------------
and as presently proposed to be conducted. No Company has received any written
31
<PAGE>
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed, from a legal standpoint, to any Liability which may be material to
its business, financial condition, operations, property or affairs. No Company
is aware of any proposed Law which would prohibit or restrict such Company from,
or otherwise materially adversely affect the Company in, conducting the Business
in any jurisdiction in which it is now conducting business or currently proposes
to conduct business.
7.16 Insurance.
---------
(a) Schedule 7.16(a) contains a true and complete list of all
----------------
policies of liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and other forms of insurance held by or on behalf of the
Companies (specifying the insurer, amount of coverage, basis of coverage (i.e.
"occurrence" or "claims made" basis), type of insurance, policy number and any
pending claims thereunder). Each Company is insured against all risks usually
insured against by Persons conducting similar businesses and operating similar
properties in the localities where the Business is conducted and the properties
of the Companies are located, under policies of such types and in such amounts
as are customarily carried by such Persons.
(b) Except as set forth on Schedule 7.16(b), with respect to each
----------------
policy of insurance listed on Schedule 7.16(a): (i) all premiums with respect
----------------
thereto are currently paid and are not subject to adjustment, and no Company is
in default in any respect with respect to its obligations under such policy, and
no basis exists that would give the insurer under any such policy the right to
cancel or unilaterally reduce or limit the stated coverages contained in such
policy; (ii) there are no outstanding claims currently pending under such policy
that could be expected to cause an increase in the insurance rates of any
Company, and no facts or circumstances exist that might reasonably be expected
to relieve the insurer under such policy of its obligations to satisfy in full
any claim thereunder; and (iii) no Company has received any notice that such
policy has been or shall be canceled or terminated or will not be renewed on
substantially the same terms as are now in effect or that the premium on such
policy shall be increased on the renewal thereof.
7.17 Labor Relations; Employees.
---------------------------
(a) Schedule 7.17(a) sets forth a list of all directors, officers and
----------------
key employees of each Company as of the date hereof, together with their
respective titles (if any), their current compensation (including salary, wages,
bonuses and commissions) and the respective dates on which they commenced
employment. To the extent any such employee is on a leave of absence, Schedule
--------
7.17(a) indicates the nature of such leave of absence and such employee's
- -------
anticipated date of return to active employment. No key employee listed on
Schedule 7.17(a) has given any Company notice and, to the Best Knowledge of the
- ----------------
Companies, none of the key employees listed on Schedule 7.17(a) has any plans or
----------------
intends to terminate his employment or engagement with such Company. No former
key employee has left the service of any Company within the last six (6) months.
(b) Schedule 7.17(b) sets forth the aggregate number of employees,
----------------
other non-supervisory personnel, independent contractors and owner/operators
that work for any Company, specifying in the case of each such Company the
number that belong to a union or are otherwise
32
<PAGE>
covered by an employment agreement or a collective bargaining agreement,
identified by terminal location or facility.
(c) Except as set forth on Schedule 7.17(c), (i) each Company
----------------
generally enjoys good relations with all of its employees, and there is no labor
strike, dispute or grievance, or work slowdown or stoppage actually pending or,
to the Best Knowledge of the Companies, threatened against or involving any
Company, and (ii) no Company is a party to or bound by any collective bargaining
agreement, union contract or similar agreement, no such agreement is currently
being negotiated by any Company, no labor union has taken any action with
respect to organizing the employees of any Company and no representation
question exists with respect to any such employees.
(d) Each Company and its ERISA Affiliates has complied in all
respects with all Laws relating to the hiring and retention of all employees,
leased employees and independent contractors relating to wages, hours, Employee
Benefit Plans, workers' compensation, unemployment, equal opportunity,
collective bargaining and the payment of social security and other taxes.
(e) Schedule 7.17(e) sets forth a true, correct and complete list of
----------------
any and all unfair labor practice charges or other proceedings before the
National Labor Relations Board, Equal Opportunity Employment Commission charges,
employment discrimination lawsuits, wrongful discharge lawsuits, Occupational
Safety and Health Administration citations and litigation, wage and hour charges
and litigation and employment related litigation which are presently pending, or
to the Best Knowledge of the Companies threatened at law or in equity, involving
any Company. Such schedule also sets forth a true, correct and complete list of
those Proceedings falling within the above categories which have been settled or
otherwise disposed of within the previous two (2) years.
(f) Except as set forth in Schedule 7.17(f), no Company is a joint
----------------
employer or alter ego, as construed under the National Labor Relations Act, as
amended, with or of any of its suppliers, distributors, customers or other
Persons with which it has any contractual arrangement, including any
owner/operator with whom any Company has a contractual relationship or any other
Person with which any Company has a leasing arrangement (collectively referred
to for the purposes of this Section 7.17(f) as "Third Parties") and no Third
--------------- -------------
Parties are alter egos of any Company. No Company (i) exercises management power
or authority over the operations or personnel of any Third Party, (ii)
supervises the employees of any Third Party or (iii) is responsible for, or has
the authority to establish, implement or effectively recommend the labor
relations or employment policies or actions, including wages, hours, working
conditions or any terms of employment, for any employee of any Third Party.
There is no interchange of personnel, no common boards of directors and no
common officers, managers or employees between any Company and any Third Party.
No Company provides any administrative services for any Third Party which is not
required by law or which is not provided in a bona fide, arms'-length
transaction at fair market value. Any administrative services provided by any
Company for any Third Party have been detailed in Schedule 7.17(f).
----------------
(g) The Companies' contractual agreements with owner/operators and
independent contractors establish a bona fide arrangement where such individuals
are independent contractors to, and not employees of, any Company and there are
no disputes,
33
<PAGE>
claims, charges or allegations pending or to the Best Knowledge of the
Companies, threatened at law or in equity before any court, agency or other
governmental or regulatory authority or entity in any form, which challenges the
independent contractor nature of such agreements other than those set forth in
Schedule 7.17(g).
- ----------------
7.18 ERISA Compliance.
----------------
(a) Schedule 7.18(a) contains a true, complete and correct list of
----------------
all Employee Benefit Plans of the Companies (collectively, the "Company Employee
----------------
Plans") (i) that cover any employees, contract employees or former employees of
- -----
the Companies or any spouses, family members or beneficiaries thereof (A) that
are maintained, sponsored or contributed to by any Company or (B) with respect
to which any Company is obligated to contribute or has any Liability, or (ii)
with respect to which any Company has any Liability on account of the
maintenance or sponsorship thereof or contribution thereto by any present or
former ERISA Affiliate of any Company.
(b) Except as set forth on Schedule 7.18(b), with respect to each
----------------
Company Employee Plan:
(i) such Company Employee Plan has been established,
maintained, operated and administered in accordance with its terms and in
compliance with ERISA, the Code, and other applicable Laws (including with
respect to reporting and disclosure);
(ii) all required, declared or discretionary (in
accordance with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
date hereof have been made or properly accrued on the Latest Balance
Sheet, or with respect to accruals properly made after the Latest Balance
Sheet Date, on the books and records of the Companies and all amounts
withheld from employees have been timely deposited into the appropriate
trust or account;
(iii) there is no unfunded Liability relating to such
Company Employee Plan which is not reflected on the Latest Balance Sheet,
or with respect to accruals properly made after the Latest Balance Sheet
Date, on the books and records of the Companies;
(iv) none of the Companies or their ERISA Affiliates, nor
any other "disqualified person" or "party in interest" (as such terms are
defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to such Company Employee Plan, has breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that could
subject any of the foregoing Persons to any tax or penalty imposed under
Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA;
(v) no Proceedings (other than routine claims for
benefits) are pending or, to the Best Knowledge of the Companies,
threatened against or relating to such Company Employee Plan or any
fiduciary thereof, and there is, to the Best Knowledge of the Companies,
no basis for any such Proceeding against such Company Employee Plan;
(vi) such Company Employee Plan, if intended to be
"qualified", within the meaning of Section 401(a) of the Code, has been
determined by the Internal Revenue
34
<PAGE>
Service to be so qualified and the related trusts are exempt from Tax under
Section 501(a) of the Code, and nothing has occurred that has or could
reasonably be expected to adversely affect such qualification or exemption;
(vii) except as may be required under Laws of general application,
no such Company Employee Plan obligates any Company to provide any employee
or former employee, or their spouses, family members or beneficiaries, any
post-employment or post-retirement health or life insurance, accident or
other "welfare-type" benefits;
(viii) each such Company Employee Plan which is subject to the
requirements of the Consolidated Omnibus Budget Reconciliation of 1985
("COBRA") and the Health Insurance Portability and Accountability Act
("HIPAA") has been maintained in compliance with COBRA and HIPAA, including
-------
all notice requirements, and no tax payable on account of Section 4980B or
any other section of the Code has been or is expected to be incurred;
(ix) neither any Company nor any ERISA Affiliate thereof is or has
ever maintained or been obligated to contribute to a Multiemployer Plan (as
defined in Section 3(37) of ERISA), a Multiple Employer Plan (as defined in
Section 413 of the Code) or a Defined Benefit Pension Plan (as defined in
Section 3(35) of ERISA);
(x) no benefit payable or which may become payable by any Company
or its ERISA Affiliates pursuant to such Company Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an excise
tax under Section 4999 of the Code or which would not be deductible by
reason of Section 280G of the Code;
(xi) each such Company Employee Plan which is intended to meet the
requirements of Section 125 of the Code meets such requirements and each
program of benefits for which employee contributions are provided pursuant
to elections made under such Company Employee Plan meets the requirements
of the Code applicable thereto; and
(xii) there has not been any act or omission by any Company or any
of its ERISA Affiliates that has given rise to or could give rise to any
fines, penalties or related charges under ERISA or the Code for which any
Company or any of its ERISA Affiliates could be liable.
(c) The Purchaser has been provided with true and complete copies, to the
extent applicable, of all documents pursuant to which each Company Employee Plan
is maintained and administered, the two most recent annual reports (Form 5500
and attachments) and financial statements therefor, all governmental rulings,
determinations, and opinions (and pending requests therefor), and, if any
Company Employee Plan provides post-employment or post-retirement health and
life insurance, accident or other "welfare-type" benefits, the most recent
valuation of the present and future obligations under such Company Employee
Plan; and the foregoing documents accurately reflect all of the terms of such
Company Employee Plan (including any agreement or provision which would limit
the ability of any Company to make any prospective amendments or terminate such
Company Employee Plan).
35
<PAGE>
7.19 Environmental Matters.
---------------------
(a) Except as set forth on Schedule 7.19(a), no Company or its
----------------
respective Affiliates, nor any of their respective predecessors, has received
any written or oral notice, report or other information (i) regarding any actual
or alleged violation of any Environmental, Health and Safety Laws, or any
Liabilities, including any investigatory, remedial or corrective obligations,
relating to any Company, the Business or such Company's currently or formerly
owned or leased properties or operations arising under the Environmental, Health
and Safety Laws or (ii) that any Company is potentially responsible under any
Environmental, Health and Safety Laws for response costs, corrective action or
natural resource damages, as those terms are defined under the Environmental,
Health and Safety Laws, at any location.
(b) Schedule 7.19(b) sets forth a complete and accurate list of all
----------------
properties and facilities previously owned, leased or operated by any Company or
any of its predecessors, (together with the Leased Properties, the "Covered
-------
Properties"). There has been no release, discharge, spill, or disposal of any
- ----------
substance at any of the Covered Properties so as to give rise to Liability of
any Company under any Environmental, Health and Safety Laws. Except as set
forth on Schedule 7.19(b), neither is there now, nor to the Best Knowledge of
----------------
the Companies, has there ever been, any asbestos-containing material in any form
or condition, underground storage tanks, above-ground storage tanks, landfills,
waste piles, surface impoundments, disposal areas, or articles or equipment
containing polychlorinated biphenyls on or at any of the Covered Properties.
(c) No Company or its Affiliates, nor any of their respective
predecessors, has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or released any substance, including any
hazardous substance, or owned or operated any property or facility (and no such
property or facility is contaminated by any such substance) in a manner that has
given or would give rise to Liabilities pursuant to any Environmental, Health
and Safety Laws, including any Liability for response costs, corrective action
costs, personal injury, property damage, natural resources damage or attorney
fees, or any investigative, corrective or remedial obligations pursuant to any
Environmental, Health and Safety Laws.
(d) No facts, events or conditions relating to the past or present
operations of any Company or its Affiliates, or any of their respective
predecessors or any of the Covered Properties will prevent, hinder or limit
continued compliance by any Company with any Environmental, Health and Safety
Laws, or give rise to any investigatory, remedial or corrective obligations
pursuant to any Environmental, Health and Safety Laws, or give rise to any other
Liabilities pursuant to Environmental Health and Safety Laws, including any
relating to on-site or off-site releases or threatened releases of materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(e) Neither this Agreement nor the consummation of the transactions
contemplated by this Agreement or any of the Related Documents will result in
any obligations for site investigation or cleanup, or notification to or consent
of government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Laws.
36
<PAGE>
(f) Each Company has provided the Purchaser with correct and complete
copies of all reports and studies within the possession or control of such
Company with respect to past or present environmental conditions or events at
any of the Covered Properties and to the Best Knowledge of the Companies there
are no other environmental reports or studies with respect thereto.
(g) The representations and warranties contained in Sections 7.19(b)
----------------
and 7.19(d) that relate to matters affecting any Covered Property during the
-------
periods prior to the ownership, occupation, use or operation of such Covered
Property by any of the Companies or their Affiliates shall be deemed to be made
as to the Best Knowledge of the Companies only.
7.20 Brokers.
-------
No Company has employed any broker or finder or incurred any Liability for
any brokerage fees, commissions or finders' fees or other similar compensation
or transaction based payments in connection with the transactions contemplated
hereby.
7.21 Related Party Transactions.
--------------------------
Except as set forth on Schedule 7.21 (which schedule identifies the five
-------------
country club memberships paid for by the Companies on behalf of the employees
specified thereon), and except for compensation to bona-fide employees of the
Companies for services rendered in the ordinary course of business, no current
or former Affiliate of any Company or any "Associate" (as defined in the rules
promulgated under the Securities Exchange Act of 1934, as amended) of any
thereof, is now, or has been during the last five fiscal years, (a) party to any
transaction or Contract with any Company (including any contract, agreement or
other arrangement providing for the furnishing of services by, or rental of real
or personal property from, or otherwise requiring payments to, any such
Affiliate or Associate), or (b) the direct or indirect owner of an interest in
any Person which is a present or potential competitor, supplier or customer of
any Company (other than non-affiliated holdings in publicly held companies).
Except as set forth on Schedule 7.21, no Company is a guarantor or otherwise
-------------
liable for any actual or potential Liability of its Affiliates and their
Associates. Except as set forth on Schedule 7.21, no Company (x) owns or
-------------
operates any vehicles, boats, aircraft, apartments or other residential or
recreational properties or facilities for executive, administrative or sales
purposes or (y) owns or pays for any social club memberships, whether or not for
the benefit of such Company and/or any of its executives.
7.22 Accounts and Notes Receivable.
-----------------------------
Except as set forth on Schedule 7.22 and except for allowances for bad debt
-------------
reflected on the Latest Balance Sheet, all accounts receivable and notes
receivable owing to any Company as of the date hereof constitute, and as of the
Closing shall constitute, valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally, and, as to enforceability, to general
principals of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and to the Best Knowledge of the Companies
there are no asserted claims, refusals to pay or other rights of set-off against
any thereof. Except as set forth on Schedule 7.22, there is (a) no account
-------------
debtor or note debtor that is
37
<PAGE>
delinquent by more than ninety (90) days for payments in excess of $10,000 in
the aggregate, (b) no account debtor or note debtor that has refused or, to the
Best Knowledge of the Companies, threatened to refuse to pay its obligations to
any Company for any reason, or has otherwise made a claim of set-off or similar
claim (other than in amounts not in excess of $5,000 per account debtor or
$10,000 in the aggregate), and (c) to the Best Knowledge of the Companies, no
account debtor or note debtor that owes any Company amounts in excess of $10,000
in the aggregate is insolvent or bankrupt.
7.23 Bank Accounts; Powers of Attorney.
---------------------------------
Schedule 7.23 sets forth a true and complete list of (a) all bank accounts
-------------
and safe deposit boxes of the Companies and all persons who are signatories
thereunder or who have access thereto and (b) the names of all persons, firms,
associations, corporations or business organizations holding general or special
powers of attorney from any Company and a summary of the terms thereof
(excluding ministerial powers of attorney granted to representatives of such
Company which are terminable at will).
7.24 Suppliers and Vendors.
---------------------
Except in the ordinary course of business, no material supplier or vendor
to any Company has canceled or otherwise terminated, or, to the Best Knowledge
of the Companies, threatened to cancel or otherwise terminate, its relationship
with the Companies or has decreased, limited or otherwise modified, or to the
Best Knowledge of the Companies, threatened to decrease, limit or otherwise
modify, the services, supplies or materials it provides to the Companies.
7.25 Customers.
---------
Except as set forth on Schedule 7.25, no customer of any Company, to whom
-------------
more than $50,000 of annual sales are attributable, has notified such Company
that it intends, or, to the Best Knowledge of the Companies, has threatened, to
terminate or materially curtail its relationship and dealings with such Company.
7.26 Conflicts of Interest.
---------------------
No Company, nor any Shareholder nor any officer, employee, agent or other
Person acting on behalf of any Company or any Shareholder has directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any Governmental Entity or other Person who was, is, or may be in
a position to help or hinder the business of such Company (or assist in
connection with any actual or proposed transaction) that (a) might subject any
Company to any damage or penalty in any Proceeding, (b) if not given in the
past, would have resulted in a Material Adverse Change, or (c) if not continued
in the future, could reasonably be expected to result in a Material Adverse
Change. There is not now, and there has never been, any employment by any
Company of, or beneficial ownership in any Company by, any governmental or
political official in any jurisdiction in which any Company has conducted or
proposes to conduct business.
38
<PAGE>
7.27 Investor Representations.
------------------------
(a) The Seller Group is acquiring the Pacer Shares and the Seller
Notes for its own account for investment only, and not with a view to the
distribution of any part thereof, and the Seller Group has no present intention
of distributing or reselling the same.
(b) The Seller Group understands that the Pacer Shares and the Seller
Notes are not registered under the Securities Act, nor qualified under
applicable state securities or "blue sky" laws on the grounds that the sale
provided for in this Agreement is exempt from registration under the Securities
Act and qualification under applicable state securities or "blue sky" laws, and
that Pacer's reliance on such exemptions is predicated on the Seller Group's
representations set forth in this Agreement.
(c) The Seller Group understands that the Pacer Shares and the Seller
Notes may not be sold, transferred or otherwise disposed of without registration
under the Securities Act and qualification under applicable state securities or
"blue sky" laws, or an exemption therefrom, and that in the absence of an
effective registration statement and applicable state qualifications covering
the Pacer Shares and the Seller Notes or an available exemption from
registration under the Securities Act and qualification under applicable state
securities or "blue sky" laws, the Pacer Shares and the Seller Notes must be
held indefinitely.
(d) The Seller Group has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of an
acquisition of the Pacer Shares and the Seller Notes by the Seller Group. By
reason of its business and financial experience, the Seller Group is
sophisticated and well informed and is otherwise capable of protecting its
interests in connection with the acquisition of the Pacer Shares and the Seller
Notes. Each member of the Seller Group is an "accredited investor" as such term
is defined in Rule 501 promulgated under the Securities Act.
(e) The Seller Group is not acquiring the Pacer Shares and the Seller
Notes as a result of or subsequent to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media, or
broadcast over television or radio or (ii) any seminar or meeting whose
attendees have been invited as a result of, subsequent to or pursuant to any of
the foregoing means of communication.
(f) The Seller Group has no need for liquidity in the investment in
Pacer, is able to bear the economic risk of such investment for an indefinite
period and is able to afford a complete loss thereof.
(g) The Seller Group acknowledges and agrees that the representations
and warranties contained in this Section 7.27 are for the benefit of Pacer and
------------
that Pacer is therefore a third party beneficiary of this Agreement with respect
to this Section 7.27.
------------
7.28 Year 2000.
---------
The Companies have (a) initiated a review and assessment of all areas
within the Business that could be adversely affected by the Year 2000 ("Y2K")
---
issue (that is, the risk that computer applications used by any Company may be
unable to recognize and perform properly
39
<PAGE>
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999), (b) developed a plan and timeline for addressing the Y2K
issue on a timely basis and (c) to date, implemented such plan in accordance
with that timetable. All computer applications that are material to the Business
will, on a timely basis, be able to perform properly date-sensitive functions
for all dates before and after January 1, 2000 (provided that the foregoing
representation insofar as it covers "off-the-shelf" computer applications that
have not been customized for the Business shall be deemed to be made to the Best
Knowledge of the Companies only).
7.29 Disclosure.
----------
This Agreement, including the Schedules, attachments or Exhibits hereto,
does not contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained herein or therein, taken as a whole,
in light of the circumstances in which they were made, not misleading.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
OF EACH MEMBER OF THE SHAREHOLDER GROUP
Each member of the Shareholder Group, severally as to itself or himself
only and not as to any other member of the Shareholder Group, represents and
warrants to the Purchaser as set forth below.
8.1 Generally.
---------
(a) Such member of the Shareholder Group has the full and absolute
legal right, capacity, power and authority to enter into this Agreement and each
Related Document to which such member of the Shareholder Group is or will be a
party. This Agreement and each Related Document to which such member of the
Shareholder Group is or will be a party has been, or upon the execution thereof
will be, duly and validly executed and delivered by such member of the
Shareholder Group, and this Agreement and each such Related Document is, or upon
such member's of the Shareholder Group execution and delivery thereof will be,
the valid and binding obligation of such member of the Shareholder Group,
enforceable against such member of the Shareholder Group in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights generally, and, as to
enforceability, to general principals of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) Neither the execution or delivery by such member of the
Shareholder Group of, nor the performance by such member of the Shareholder
Group of his or its obligations under, this Agreement and each Related Document
to which such member of the Shareholder Group is or will be a party, nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
by such member of the Shareholder Group with any of the provisions hereof or
thereof will (i) conflict with, or result in any violation of, or cause a
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, any
40
<PAGE>
term, condition or provision of any Contract to which any Company or such member
of the Shareholder Group is a party or by which any Company or such member of
the Shareholder Group or its or his assets may be bound, or (ii) violate any Law
applicable to such member of the Shareholder Group.
(c) No Permit, authorization, consent or approval of or by, or any
notification of or filing with, any Person (governmental or private) is required
in connection with the execution, delivery and performance by such member of the
Shareholder Group of this Agreement or any of the Related Documents to which
such member of the Shareholder Group is or will be a party or the consummation
by such member of the Shareholder Group of the transactions contemplated hereby
or thereby.
8.2 Brokers.
-------
Such member of the Shareholder Group has not employed any broker or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
or other similar compensation or transaction based payments in connection with
the transactions contemplated hereby.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Companies and the Shareholders
as set forth below.
9.1 Organization; Corporate Authority.
---------------------------------
The Purchaser is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its assets and properties and to carry on its business as presently conducted.
The Purchaser is duly qualified and in good standing to transact business as a
foreign Person in those jurisdictions set forth on Schedule 9.1, which
------------
constitute all the jurisdictions in which the character of the property owned,
leased or operated by the Purchaser or the nature of the business or activities
conducted by the Purchaser makes such qualification necessary. The Companies
have been furnished with true, correct and complete copies of the Purchaser's
Charter Documents, in each case as amended and in effect on and as of the date
this representation is being made and is deemed made hereunder.
9.2 Authority; Authorization; Execution and Delivery; Enforceability; No
--------------------------------------------------------------------
Conflict.
- --------
(a) The Purchaser has all requisite power and authority (corporate or
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. The Purchaser's execution and
delivery of this Agreement and each Related Document to which it is or will be a
party, and performance by the Purchaser of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary corporate
action on the part of the Purchaser. Each of this Agreement and the Related
Documents to which the
41
<PAGE>
Purchaser is or will be a party has been or upon the Purchaser's execution
thereof will be, duly and validly executed and delivered by the Purchaser, and
constitutes, or upon the Purchaser's execution and delivery thereof will
constitute, the valid and binding obligation of the Purchaser, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally, and, as to enforceability, to general principals of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
(b) Neither the Purchaser's execution and delivery of, nor the
performance of its obligations under, this Agreement and each Related Document
to which it is or will be a party, nor the consummation of the transactions
contemplated hereby or thereby, nor the compliance by the Purchaser with any of
the provisions hereof and thereof, will (i) conflict with or result in any
violation of, any of the terms, conditions or provisions of, or constitute (with
due notice or lapse of time, or both) a default under, or give rise to any right
of termination, cancellation or acceleration or result in the creation of any
Encumbrance upon any of the assets or properties of the Purchaser under
provision of the Purchaser's Charter Documents or any Contract to which the
Purchaser is a party or by which it or any of its assets or properties is or may
be bound or (ii) violate, or result in the creation of an Encumbrance upon any
of the Purchaser's assets as a result of, any Law applicable to the Purchaser or
any of its properties or assets.
9.3 Consents.
--------
Except as set forth on Schedule 9.3, no Permit, authorization, consent or
------------
approval of or by, or notification of or filing with, any Person (governmental
or otherwise) is required for, or as a result of, the execution, delivery and
performance by the Purchaser of this Agreement and the Related Documents to
which the Purchaser is or will be a party and the consummation of the
transactions contemplated hereby or thereby.
9.4 Pacer Capitalization.
--------------------
(a) The authorized capital stock of Pacer is as set forth on Schedule
--------
9.4, which schedule also sets forth the total number of outstanding shares of
- ---
Pacer. All such outstanding shares disclosed on Schedule 9.4 are duly and
------------
validly issued and outstanding, fully paid and non-assessable, with no personal
Liability attaching to the ownership thereof.
(b) Except as set forth on Schedule 9.4 or in the Pacer Registration
------------
Statement, there are no securities presently outstanding, and on the Closing
Date there will not be any outstanding securities, which are convertible into,
exchangeable for, or carrying the right to acquire, any common stock of Pacer,
or subscriptions, warrants, options, calls, puts or convertible securities
obligating Pacer to issue any of its common stock.
9.5 Duly Authorized, Validly Issued Pacer Shares.
--------------------------------------------
The Pacer Shares have been duly authorized and, when issued and delivered
to the Sellers against payment therefor in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and free of any preemptive
or similar rights applicable to such issuance.
42
<PAGE>
9.6 Brokers.
-------
The Purchaser has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees or other similar
compensation or transaction based payments in connection with the transactions
contemplated hereby.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 Access to Records and Properties.
--------------------------------
From and after the date hereof until the Closing or the termination of this
Agreement pursuant to Article XIII, each Company shall afford, and the
------------
Shareholders shall cause the Company to afford, (a) to the Purchaser, its
lenders and other financing sources and their respective authorized
representatives, including legal counsel and accountants, free and full access
at all reasonable times to the assets, business, facilities, properties, books,
records (including Tax returns filed and in preparation), customers,
consultants, and key employees of, or relating to, each Company in order that
the Purchaser and its lenders and other financing sources have the full
opportunity to make such investigation as they shall reasonably desire to make
of the affairs of such Company, and each Company and the Shareholders shall
cooperate fully in connection therewith, and (b) to the respective independent
certified public accountants of the Purchaser, its lenders and other financing
sources free and full access at all reasonable times to the records of the
independent certified public accountants of each Company relating to such
Company. The investigation contemplated by this Section 10.1 shall not affect
------------
or otherwise diminish or obviate in any respect any of the representations and
warranties or the indemnification obligations of any Company or the Shareholders
contained in this Agreement. The parties hereto will endeavor in all reasonable
respects to minimize any disruption to any other party's business in connection
with the conduct of the due diligence process contemplated herein.
10.2 Conduct of the Business.
-----------------------
From and after the date hereof until the earlier of the Closing or the
termination of this Agreement pursuant to Article XIII, except as expressly
------------
provided by this Agreement or as otherwise previously consented to in writing by
the Purchaser, each Company shall, and the Shareholders shall cause each Company
to:
(a) conduct its business substantially as presently operated and only
in the ordinary course consistent with past practice;
(b) not undertake (or enter into any agreement or commitment to
undertake) any action, and use its commercially reasonable efforts to avoid and
prevent the occurrence of any event, described in Section 7.8;
-----------
(c) not enter into any transaction which is not at arms-length with
unaffiliated third Persons, or any transaction with any affiliated third Person;
(d) not acquire or dispose of any material assets;
43
<PAGE>
(e) use all commercially reasonable efforts to (A) maintain its
business, assets, relations with present employees, customers and suppliers,
licenses and operations as an ongoing business and preserve its goodwill, in
accordance with past custom and (B) to satisfy each of the closing conditions
set forth in Article XI;
----------
(f) not issue or sell any shares of any capital stock or issue or sell
any securities convertible into, exercisable or exchangeable for or options or
warrants to purchase or rights to subscribe for, any shares of any of its
capital stock, or enter into any agreement, contract or other commitment to do
any of the foregoing;
(g) not declare or pay any dividend or distribution on or with respect
to its capital stock without the prior written consent of the Purchaser, not
change the number of authorized shares of its capital stock or reclassify,
combine, split, subdivide or redeem or otherwise repurchase any of its capital
stock, or issue, deliver, pledge or encumber any additional capital stock or
other securities equivalent to or exchangeable for capital stock or enter into
any Contract to do any of the foregoing; and
(h) not delay or postpone the payment of accounts payable and other
obligations and liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice.
10.3 Efforts to Consummate.
---------------------
Subject to the terms and conditions of this Agreement, each party shall use
its commercially reasonable efforts to take or cause to be taken all actions and
do or cause to be done all things required under all applicable Laws, Orders and
Contracts to consummate the transactions contemplated hereby, including all
commercially reasonable efforts to obtain or make from or with all Persons all
such consents, approvals, authorizations, waivers, notifications and filings as
are required to be obtained or made by such party under such Laws, Orders and
Contracts for the consummation of the transactions contemplated hereby
(including the filing of all notification and reports forms and other
information required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act")); provided however that nothing contained
------- -------- -------
herein shall require the Purchaser to undertake any action, including the
divestiture of any assets or properties, that may be required to obtain the
consent or approval of the United States Federal Trade Commission or Department
of Justice for the consummation of the transactions contemplated hereby. The
Seller Group shall take or cause to be taken all actions and do or cause to be
done all things required to extinguish at or prior to the Closing all
indebtedness owed by the Companies and to release any and all Encumbrances on or
affecting the Purchased Assets.
10.4 Negotiation with Others.
-----------------------
(a) From and after the date hereof until the earlier of the Closing or
the termination of this Agreement pursuant to Article XIII, the Seller Group
------------
shall not, and shall cause its officers, directors, Affiliates, representatives
and agents not to, directly or indirectly, (i) take any action to solicit or
initiate any Acquisition Proposal, (ii) continue, initiate or engage in
negotiations or discussions relating to an Acquisition Proposal with, or
disclose or provide any non-public information (other than in the ordinary
course of business or otherwise required by
<PAGE>
Law) relating to the Company to any Person other than the parties hereto and
their respective representatives or (iii) enter into any written or oral
agreement or understanding with any Person (other than the Purchaser) regarding
an Acquisition Proposal. If any member of the Seller Group receives any
unsolicited offer or proposal to enter into negotiations relating to any
Acquisition Proposal, such party shall promptly notify the Purchaser in writing
of such offer or proposal and the general economic terms of such offer or
proposal and shall furnish a copy of any written offer or proposal thereto.
(b) The parties recognize and acknowledge that a breach of this Section
-------
10.4 will cause irreparable and material loss and damage to the non-breaching
- ----
party as to which it will not have an adequate remedy at law or in equity.
Accordingly, each party acknowledges and agrees that the issuance of an
injunction or other equitable remedy is an appropriate remedy for any such
breach.
10.5 Financing.
---------
From and after the date hereof until the earlier of the Closing or the
termination of this Agreement pursuant to Article XIII, the Purchaser will at
------------
its own cost endeavor to obtain such debt and/or equity financing and such
related consents, approvals and waivers from its financing sources as the
Purchaser shall in its sole discretion deem necessary for (a) the consummation
of the transactions contemplated hereby and (b) the payment of all costs and
expenses of the Purchaser incurred in connection herewith (the "Financing").
---------
Each Company and the Shareholders will in good faith cooperate with the
Purchaser, and provide the Purchaser with such information and assistance as it
may reasonably request (subject to the Purchaser's reimbursement of the out-of-
pocket costs to unaffiliated third parties incurred by the Seller Group in
connection therewith and as approved by the Purchaser), in connection with the
Purchaser's efforts to obtain the Financing.
10.6 Notice of Prospective Breach.
----------------------------
Each party shall immediately notify the other parties in writing upon the
occurrence, or the failure to occur, of any event, which occurrence or failure
to occur would be reasonably likely to cause (a) any representation or warranty
of such party that is contained in this Agreement or any Related Document to be
untrue or inaccurate in any respect at any time from the date of this Agreement
to the Closing as if such representation and warranty were made at such time or
(b) any failure of any party hereto to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it under this Agreement.
10.7 Public Announcements.
--------------------
From and after the date hereof until the Closing, each Company and the
Shareholders agree that, except (a) as otherwise required by Law and (b) for
disclosure to its respective directors, officers, employees, financial advisors,
financing sources, legal counsel, independent certified public accountants or
other agents, advisors or representatives on a need-to-know basis and with whom
such party has a confidential relationship, he or it will not issue any reports,
statements or releases, in each case pertaining to this Agreement or any Related
Document to which he or it is a party or the transactions contemplated hereby or
thereby, without the prior written consent of the Purchaser, which consent shall
not unreasonably be withheld or delayed.
45
<PAGE>
10.8 Exchange Proceeds.
-----------------
If, between the date hereof and the Closing, any Company receives any
proceeds in consideration for the exchange of any of its assets that constitute
Purchased Assets, whether from the sale of any such assets, from insurance
proceeds payable on account of any loss or casualty to such assets, any proceeds
from the taking of such assets pursuant to the power of eminent domain, or any
other proceeds from whatever source relating to the disposition of such assets
(the "Exchange Proceeds"), the Company shall promptly notify the Purchaser of
-----------------
such receipt of Exchange Proceeds and shall consult with the Purchaser with
respect to the application of any such Exchange Proceeds.
10.9 Non-Competition Covenant.
------------------------
(a) The Seller Group acknowledges and agrees that as a mutual condition to
the respective obligations of the parties at the Closing, as a material
inducement to the Purchaser to enter into and perform its obligations hereunder
and in consideration of the payments and other consideration to be received by
them under this Agreement and the Related Documents, none of the Shareholders or
the Companies shall, without the prior written consent of the Purchaser, at any
time during the period beginning on the Closing Date and ending on the fifth
anniversary thereof (the "Restrictive Period"), (i) 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 such Competing
Business, (ii) assist others in engaging in any Competing Business in the manner
described in clause (i) above, (iii) induce any employees of the Purchaser or
any of its subsidiaries or Affiliates at any time during the Restrictive Period
to terminate their employment with the Purchaser or any of its subsidiaries or
Affiliates or to engage in any Competing Business, or (iv) induce any customer,
vendor or agent or any other Person with which the Purchaser or its respective
subsidiaries or Affiliates has a business relationship, contractual or
otherwise, at any time during the Restrictive Period to terminate or alter such
business relationship. This covenant is considered an integral part of this
Agreement. The foregoing restriction shall not apply to the ownership of
publicly traded securities which represent less than 5% of the ownership
interests of the issuer.
(b) As used herein, the term "Competing Business" shall mean (i) any
------------------
business conducted in (A) any county in the State of California, including
without limitation Alameda County, Alpine County, Amador County, Butte County,
Calaveras County, Colusa County, Contra Costa County, Del Norte County, El
Dorado County, Fresno County, Glenn County, Humboldt County, Imperial County,
Inyo County, Kern County, Kings County, Lake County, Lassen County, Los Angeles
County, Madera County, Marin County, Mariposa County, Mendocino County, Merced
County, Modoc County, Mono County, Monterey County, Napa County, Nevada County,
Orange County, Placer County, Plumas County, Riverside County, Sacramento
County, San Benito County, San Bernardino County, San Diego County, San
Francisco County, San Joaquin County, San Luis Obispo County, San Mateo County,
Santa Barbara County, Santa Clara County, Santa Cruz County, Shasta County,
Sierra County, Siskiyou County, Solano County, Sonoma County, Stanislaus County,
Sutter County, Tehama County, Trinity County, Tulare County, Tuolumne County,
Ventura County, Yolo County, and Yuba County and (B) every other state, province
or other political subdivision of the United States, Canada, Mexico, Japan or
China that is engaged in the business of providing intermodal
46
<PAGE>
freight transportation, drayage, transloading or warehousing, container depot
or repair services or (ii) any business described in the foregoing clause (i) if
such business or the services or products sold by it are competitive, directly
or indirectly, with the Business or any services or products provided or sold by
the Business on the date hereof or on the Closing Date (or with respect to which
there are fixed plans on the date hereof or on the Closing Date for the
provision or sale of the same by the Business). Anything contained in the
immediately preceding sentence to the contrary notwithstanding, any entity which
has separate divisions or business units, one or more of which are engaged in a
business described above, will not be deemed a Competing Business with respect
to those portions of such entity which are not engaged in a business described
above so long as such Company's or Shareholder's association with any such
separate divisions or business units (fully taking into account its or his
functions and the nature of its or his work at such division or business unit)
does not involve existing customers of any Company or relate in any material
respect to that portion of such business which would be a Competing Business
hereunder.
(c) If, at the time of enforcement of this Section 10.9, a court holds that
------------
the restrictions stated herein are unreasonable under the circumstances then
existing, the parties agree that the maximum period, scope or geographical area
reasonable under such circumstances shall be substituted for the stated period,
scope or area. Additionally, with respect to each county in the State of
California set forth in Section 10.9(b), the covenant not to compete set forth
---------------
in Section 10.9(a) is intended as a separate covenant with respect thereto. If
---------------
any one of such covenants is declared invalid for any reason, this determination
shall not affect the validity of the remainder of the covenants or any covenant
covering territory other than the State of California. The other covenants set
forth in Section 10.9(a) shall remain in effect as if the provision had been
---------------
executed without the invalid covenants. The parties hereby declare that they
intend that the remaining covenants of the provision continue to be effective
without any covenants that have been declared invalid. The parties hereto
acknowledge that money damages would be an inadequate remedy for any breach of
this Section 10.9. Therefore, in the event of a breach or threatened breach of
------------
this Section 10.9, the Purchaser or its successors or assigns may, in addition
------------
to other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Section
-------
10.9 (without posting a bond or other security).
- ----
10.10 Disclosure of Information.
-------------------------
(a) As used in this Agreement, the term "Confidential Information,"
-------------------------
with respect to any Person, means all information (whether written or oral)
furnished (whether before or after the date hereof) by such Person or its
directors, officers, employees, Affiliates, representatives (including its
financial advisors, attorneys and accountants) or agents (collectively,
"Representatives") to any other Person or its Representatives, and all analyses,
---------------
compilations, forecasts, studies or other documents prepared by such other
Person or its Representatives in connection with the transaction contemplated by
this Agreement which contain or reflect any such information; provided, however,
-------- -------
that the term "Confidential Information" shall not include information which (i)
is or becomes publicly available other than as a result of a disclosure by any
Person or its Representatives in violation of this Agreement, or (ii) is or
becomes available to such other Person on a non-confidential basis from a source
which is not prohibited from disclosing such information by any legal,
contractual or fiduciary obligation; provided further, however, that for
---------------- -------
purposes of this Section 10.10, from and after the Closing, Confidential
-------------
47
<PAGE>
Information of any Company which constitutes or relates to a Purchased Asset, an
Assigned Contract or an Assumed Liability shall be deemed Confidential
Information of the Purchaser and shall, as of such time, no longer be deemed
Confidential Information of such Company.
(b) The Purchaser will keep all Confidential Information of each Company
confidential and will not (except as required by applicable law, regulation or
legal process, and then only after compliance with the last sentence of this
Section 10.10.(b)) without the prior written consent of such Company, disclose
- -----------------
any of such Confidential Information in any manner whatsoever, directly or
indirectly, and will not use any Confidential Information of any Company except
for the purposes contemplated by this Agreement; provided, however, that the
-------- -------
Purchaser may reveal Confidential Information of any Company to its
Representatives (i) who need to know such Confidential Information for the
purposes contemplated by this Agreement, (ii) who are informed by the Purchaser
of the confidential nature of the Confidential Information and (iii) who agree
to act in accordance with the terms of this Section 10.10(b). The Purchaser
----------------
will cause its Representatives to observe the terms of this Section 10.10(b) and
----------------
will be responsible for any breach hereof by any of its Representatives. In the
event that the Purchaser or any of its Representatives is requested pursuant to,
or required by, applicable law, regulation or legal process to disclose any
Confidential Information of any Company, the Purchaser will notify such Company
promptly so that it may seek a protective order or other appropriate remedy or,
in its sole discretion, waive compliance with the terms of this Section
-------
10.10(b). In any event, the Purchaser will furnish only that portion of the
Confidential Information of such Company which it is advised by counsel is
legally required and will exercise all commercially reasonable efforts to obtain
reliable assurance, to the extent it is possible to obtain the same, that
confidential treatment will be accorded to such Confidential Information.
(c) Each of the Companies and the Shareholders will keep all Confidential
Information of the Purchaser confidential and will not (except as required by
applicable law, regulation or legal process, and only after compliance with the
last sentence of this Section 10.10(c)), without the prior written consent of
----------------
the Purchaser, disclose any Confidential Information in any manner whatsoever,
directly or indirectly, and will not use any Confidential Information of the
Purchaser except for the purposes contemplated by this Agreement; provided,
--------
however, that of the Companies and the Shareholders may reveal Confidential
- -------
Information of the Purchaser and its Affiliates to its Representatives (i) who
need to know the Confidential Information for the purposes contemplated by this
Agreement, (ii) who are informed by such Company or Shareholder of the
confidential nature of the Confidential Information and (iii) who agree to act
in accordance with the terms of this Section 10.10(c). Each of the Companies
----------------
and the Shareholders will cause its Representatives to observe the terms of this
Section 10.10(c), and will be responsible for any breach hereof by any of its
- ----------------
Representatives. In the event that any of the Companies or the Shareholders or
any of its Representatives is requested pursuant to, or required by, applicable
law, regulation or legal process to disclose any Confidential Information of the
Purchaser, such Company or Shareholder will notify the Purchaser promptly so
that it may seek a protective order or other appropriate remedy or, in its sole
discretion, waive compliance with the terms of this Section 10.10(c). In any
----------------
event, such Company or Shareholder will furnish only that portion of the
Confidential Information of the Purchaser which it is advised by counsel is
legally required and will exercise all commercially reasonable efforts to obtain
reliable assurance, to the extent it is possible to obtain the same, that
confidential treatment will be accorded to such Confidential Information.
48
<PAGE>
(d) Each of the parties recognizes and acknowledges that a breach of its
covenants in Section 10.10(b) or (c), as the case may be, will cause irreparable
---------------- ---
and material loss and damage to the other parties, the amount of which cannot be
readily determined and as to which such other parties will not have an adequate
remedy at law or in damages. Accordingly, in addition to any remedy such other
parties may have in damages by an action at law, such other parties shall be
entitled to the issuance of an injunction restraining any such breach or
threatened breach or any other remedy at law or in equity for any such breach.
10.11 Use of Proprietary Name.
-----------------------
From and after the Closing, no Company nor any Shareholder shall use the
name "Conex Global Logistics," "MSL Transportation Group," "Jupiter Freight" or
any derivation thereof for any purpose.
10.12 Supplements to Schedules.
------------------------
Prior to the Closing, each of the Companies and the Shareholders shall
promptly supplement or amend any Schedule with respect to any matter arising
after the date of this Agreement, which, if existing or occurring on the date of
this Agreement, would have been required to be set forth or described in such
Schedule. No supplement or amendment of a Schedule made pursuant to this
Section shall be deemed to constitute a cure of any breach of any representation
or warranty made by such Company or Shareholders pursuant to this Agreement
unless consented to in writing by the Purchaser, which consent may be withheld
by the Purchaser in its sole discretion for any reason. For purposes of the
rights and obligations of the parties hereunder, upon the occurrence of the
Closing, any such supplemental or amended disclosure consented to in writing by
the Purchaser as aforesaid shall be deemed to have been disclosed as of the date
of this Agreement.
10.13 Certain Employee Matters.
------------------------
On the Closing Date the Purchaser shall offer employment to all of the
employees of each Company actively employed by the Companies in the Business on
the Closing Date on terms and conditions similar to those provided by such
Company prior to the Closing Date (any such employees who accept such offer of
employment being referred to herein as the "Hired Employees"), and the Purchaser
---------------
shall initially provide benefits to the Hired Employees, effective as to group
health insurance benefits on the Closing Date and effective to other employee
benefits as soon as practicable after their acceptance of the Purchaser's offer
of employment, in each case which are reasonably comparable on an overall basis
to the benefits provided by such Company prior to the Closing Date to such
employees, subject in the case of Keller and Uchida to the terms and conditions
of their respective Employment Agreements and Consulting Agreement, as
applicable, entered into at the Closing. Nothing contained in this Agreement
shall confer upon any Hired Employee any rights or remedies of any nature or
kind whatsoever under or by reason of this Agreement, including any right to
employment or continued employment or to any benefits that may be provided,
directly or indirectly, under any employee benefit plan, policy or arrangement
of the Purchaser, nor shall anything contained in this Agreement constitute a
limitation on or restriction against the right of the Purchaser to amend, modify
or terminate any such plan, policy or arrangement at any time and from time to
time.
49
<PAGE>
10.14 Transfer of Pacer Shares.
------------------------
In addition to, and not by way of limitation of, any provision of any
other applicable Contract (including the Pacer Shareholder's Agreement), the
Seller Group shall not without the prior written consent of Pacer sell, assign,
transfer, pledge, hypothecate or otherwise dispose of any Pacer Shares at any
time during the period commencing on the date hereof and ending on the first to
occur of (x) the second anniversary of the Closing and (y) the six-month
anniversary of the closing of an initial public offering of the common stock of
Pacer pursuant to an effective registration statement filed under the Securities
Act (other than on Form S-4 or Form S-8 (or any successor form thereto)
promulgated thereunder).
10.15 Non-Solicitation Covenant.
-------------------------
In the event the Closing does not occur and this Agreement is terminated
pursuant to Article XIII, the Purchaser shall not, without the prior written
------------
consent of Conex, at any time during the period beginning on the effective date
of the termination of this Agreement and ending on the third anniversary thereof
(the "Non-Solicitation Period"), actively and directly solicit or induce any
-----------------------
employee of any of the Companies at any time during the Non-Solicitation Period
to terminate his or her employment with such Company.
ARTICLE XI
CLOSING CONDITIONS
11.1 Conditions to Each Party's Obligations.
--------------------------------------
The respective obligations of the parties to consummate the transactions
contemplated hereby are subject to the satisfaction prior to the Closing Date of
the conditions set forth below unless waived (to the extent such conditions can
be waived) by the Company or the Purchaser, as applicable.
(a) Approvals. All authorizations, consents, Orders or approvals of,
---------
or declarations or filings with, or expiration of waiting periods imposed by,
any Governmental Entity (including those under the HSR Act) necessary for the
consummation of the transactions contemplated hereby shall have been obtained or
made.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(c) Actions and Statutes. No action, suit or proceeding shall have
--------------------
been taken or threatened, and no statute, rule, regulation or Order shall have
been enacted, promulgated or issued or deemed applicable to the transactions
contemplated by this Agreement or the Related Documents by any Governmental
Entity that would (i) make the consummation of the transactions contemplated
hereby or thereby illegal or substantially delay the consummation of any
material aspect of the transactions contemplated hereby or thereby or (ii)
render any party unable to consummate the transactions contemplated hereby or
thereby.
50
<PAGE>
11.2 Conditions to Obligations of the Purchaser.
------------------------------------------
The obligations of the Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the conditions
set forth below, unless waived (to the extent such conditions can be waived) by
the Purchaser:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties made by each Company and the Shareholders in this Agreement and
the Related Documents shall be true and correct in all material respects as of
the Closing Date with the same effect as if such representations and warranties
had been made at and as of the Closing Date (provided however that to the extent
a representation is already limited to matters characterized as "material" it
shall be correct in all respects), and the Purchaser shall have received a
certificate to that effect signed by each Company and each Shareholder.
(b) Performance of Obligations. Each Company and the Shareholders
--------------------------
shall have performed in all material respects all obligations and covenants
required to be performed by each of them under this Agreement and the Related
Documents as of the Closing Date, and the Purchaser shall have received a
certificate to that effect signed by each Company and each Shareholder.
(c) Authorization. All action necessary to authorize the execution,
-------------
delivery and performance of this Agreement and the Related Documents by each
Company and the Shareholders and the consummation of the transactions
contemplated hereby and thereby, including requisite shareholder approvals,
shall have been duly and validly taken by each Company and the Shareholders, and
each Company and the Shareholders shall have the full power and right to
consummate the transactions contemplated hereby and thereby on the terms
provided herein and therein.
(d) Investigation. The Purchaser shall have completed and be
-------------
satisfied in its sole discretion with the results of its business, financial,
tax, accounting and legal due diligence investigation and review of the
Companies.
(e) Audited Financials. The Companies shall have achieved, in the
------------------
sole discretion of the Purchaser, combined Adjusted EBIT of at least $6,000,000
for the fiscal year ending December 31, 1998, and the Purchaser shall have
received a true, correct and complete copy of, and shall in its sole discretion
be satisfied with, the Audited Financial Statements. The Purchaser shall also be
satisfied in its sole discretion with the combined revenues and expenses of the
Companies for the period from January 1, 1999, through the Closing Date.
(f) Opinion of the Seller Group's Counsel. The Purchaser shall have
-------------------------------------
received an opinion of Crosby, Heafey, Roach & May, counsel for the Seller
Group, dated the Closing Date and in form and substance reasonably satisfactory
to the Purchaser.
(g) Consents and Approvals. The Purchaser shall have received duly
----------------------
executed copies of all consents and approvals required for or in connection with
(i) the execution and delivery by each Company and the Shareholders of this
Agreement and each of the Related Documents to which each of them is a party ,
the consummation of the transactions contemplated hereby and thereby, and (ii)
the continued conduct of the Business as previously conducted
51
<PAGE>
(including any consent identified on Schedule 7.3), in form and substance
------------
reasonably satisfactory to the Purchaser and its counsel.
(h) Financing. The Purchaser shall have obtained the Financing
---------
(including all required consents, approvals and waivers) on terms and conditions
satisfactory to the Purchaser in its sole discretion.
(i) Related Documents. Each of the Related Documents set forth
-----------------
below shall have been executed and delivered by the parties thereto and the
transactions contemplated thereby to be completed at or prior to the Closing
substantially consummated or effected, as the case may be, in accordance with
the terms thereof.
(xvii) Employment Agreements. Keller shall have executed and
---------------------
delivered an employment agreement with the Purchaser substantially in the
form of Exhibit E-1 attached hereto (the "Keller Employment Agreement"),
---------------------------
and Uchida shall have executed and delivered an employment agreement with
the Purchaser substantially in the form of Exhibit E-2 attached hereto (the
"Uchida Employment Agreement").
---------------------------
(i) Uchida Consulting Agreement. Uchida shall have executed
---------------------------
and delivered a consulting agreement with the Purchaser substantially in
the form of Exhibit F attached hereto (the "Uchida Consulting Agreement").
---------------------------
(ii) Joinders to the Pacer Shareholders Agreement. Each of
--------------------------------------------
the Sellers receiving Pacer Shares shall have executed and delivered to the
Purchaser a joinder to the Pacer Shareholders' Agreement substantially in
the form of Exhibit G attached hereto (collectively, the "Joinder
-------
Agreements").
----------
(iii) Lease. KU Realty and Conex, as applicable, shall have
-----
executed and delivered leases, in substantially the form of Exhibit H
---------
attached hereto (each, a "Lease," and collectively the "Leases"), for the
------
real properties listed on Schedule 11.2(i)(iv).
--------------------
(iv) Bill of Sale. Each Company shall have executed and
------------
delivered a Bill of Sale to the Purchaser.
(j) Seller Certificates. Each of the following certificates shall
-------------------
have been executed and/or delivered, as the case may be, by the Person who or
which is the subject thereof:
(i) a certificate of the secretary of each Company, dated as
of the Closing Date, certifying (i) that true and complete copies of such
Company's Charter Documents as in effect on the Closing Date are attached
thereto, (ii) as to the incumbency and genuineness of the signatures of
each officer of such Person executing this Agreement and the Related
Documents on behalf of such Person; and (iii) the genuineness of the
resolutions (attached thereto) of the board of directors or similar
governing body of such Person authorizing the execution, delivery and
performance of this Agreement and the Related Documents to which such
Person is a party and the consummation of the transactions contemplated
hereby and thereby ;
(ii) certificates dated within thirty (30) days of the
Closing Date of the secretaries of state of the states in which each
Company is organized and qualified to do
52
<PAGE>
business, certifying as to the good standing and non-delinquent tax status
of such Company;
(iii) a certificate signed by each Company, dated as of the
Closing Date, and certifying as to (A) the accuracy of the representations
and warranties of such Company contained herein, as contemplated by Section
-------
11.2(a), and (B) the performance of the covenants of the Company contained
-------
herein, as contemplated in Section 11.2(b); and
---------------
(iv) a certificate of a principal executive officer of each
Company, dated as of the Closing Date, certifying that such Company is not
a foreign person within the meaning of Section 1445 of the Code.
(k) Change of Corporate Name. The Seller Group shall have delivered
------------------------
to the Purchaser all documentation necessary, including a duly authorized and
executed amendments to each Company's respective Charter, to change such
Company's corporate name to a name that does not include any of the words
"Conex," "MSL" or "Jupiter."
11.3 Conditions to Obligations of each Company and the Shareholders.
--------------------------------------------------------------
The obligations of each Company and the Shareholders to consummate the
transactions contemplated by this Agreement at the Closing are subject to the
satisfaction of the conditions set forth below unless waived (to the extent such
conditions can be waived) by each Company and the Shareholders.
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties made by the Purchaser in this Agreement and the Related Documents
shall be true and correct in all material respects at and as of the Closing Date
with the same effect as if such warranties and representations had been made at
and as of the Closing Date (provided however that to the extent a representation
is already limited to matters characterized as "material" it shall be correct in
all respects), and the Seller Group shall have received a certificate to that
effect signed by a principal executive officer of the Purchaser.
(b) Performance of Obligations of the Purchaser. The Purchaser shall
-------------------------------------------
have performed in all material respects all obligations and covenants required
to be performed by it under this Agreement and the Related Documents prior to or
as of the Closing Date and the Seller Group shall have received a certificate to
that effect signed by a principal executive officer of the Purchaser.
(c) Authorization. All action necessary to authorize the execution,
-------------
delivery and performance of this Agreement and the Related Documents by the
Purchaser and the consummation of the transactions contemplated hereby and
thereby, including the requisite shareholder approvals (if any), shall have been
duly and validly taken and the Purchaser shall have full power and right to
consummate the transactions contemplated hereby and thereby on the terms
provided herein and therein.
(d) Opinion of the Purchaser's Counsel. The Seller Group shall have
----------------------------------
received an opinion of O'Sullivan Graev & Karabell, LLP, counsel for the
Purchaser, dated the Closing Date and in form and substance reasonably
satisfactory to the Seller Group.
53
<PAGE>
(e) Consents and Approvals. The Seller Group shall have received duly
----------------------
executed copies of all consents and approvals required for or in connection with
the execution and delivery by the Purchaser of this Agreement and each of the
Related Documents to which it may be a party and the consummation of the
transactions contemplated hereby and thereby, in form and substance reasonably
satisfactory to the Seller Group.
(f) Related Documents. Each of the Related Documents to which the
-----------------
Purchaser is a party shall have been executed and/or delivered by the Purchaser
and the transactions contemplated thereby to be completed at or prior to the
Closing shall have been substantially consummated or effected, as the case may
be, in accordance with the terms thereof.
(g) Purchaser Certificates. Each of the following certificates shall
----------------------
have been executed and/or delivered, as the case may be, by the Person who or
which is the subject thereof:
(i) a certificate of the secretary of the Purchaser, dated as
of the Closing Date, certifying (A) that true and complete copies of the
Purchaser's Charter Documents as in effect on the Closing Date are attached
thereto, (B) as to the incumbency and genuineness of the signatures of each
officer of such Person executing this Agreement and the Related Documents
on behalf of the Purchaser; and (C) the genuineness of the resolutions
(attached thereto) of the board of directors or similar governing body of
the Purchaser authorizing the execution, delivery and performance of this
Agreement and the Related Documents to which the Purchaser is a party and
the consummation of the transactions contemplated hereby and thereby;
(ii) certificates dated within five (5) days of the Closing
Date of the secretaries of state of the states in which the Purchaser is
organized, certifying as to the good standing and non-delinquent tax status
of the Purchaser; and
(iii) a certificate signed by a principal executive officer of
the Purchaser dated as of the Closing Date, and certifying as to (A) the
accuracy of the representations and warranties of the Purchaser contained
herein, as contemplated by Section 11.3(a) hereof and (B) the performance
---------------
of the covenants of the Purchaser contained herein, as contemplated in
Section 11.3(b) hereof.
---------------
ARTICLE XII
INDEMNIFICATION
12.1 Generally.
---------
(a) Subject to the further provisions of this Article XII, the Seller
-----------
Group shall jointly and severally indemnify the Purchaser Indemnified Persons
for, and hold each of them harmless from and against, any and all Purchaser
Losses arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of any Company contained in this Agreement or any Related Document
or in any certificate delivered by any Company in connection herewith or
therewith at or before the Closing
54
<PAGE>
(or any facts or circumstances constituting any such untruth, inaccuracy or
breach) (in determining Losses subject to indemnification as a result of
the untruth, inaccuracy or breach of Section 7.28, the costs incurred by
the Purchaser Indemnified Persons in connection with the installation of
the LOTS and ASSIST computer systems shall not be taken into account);
(ii) the breach of any agreement or covenant of any Company
contained in this Agreement or any Related Document;
(iii) the Excluded Assets;
(iv) the Excluded Liabilities;
(v) any Liabilities (contingent or otherwise and including
Liability for response costs, personal injury, property damage or natural
resource damage) arising under Environmental, Health and Safety Laws,
including those relating to the handling, treatment, storage, disposal,
release or threatened release of petroleum, or hazardous or toxic
materials, substances or wastes at, onto or from any Real Property, or any
offsite waste treatment, storage disposal facility associated with the
Business, except for any such obligations or Liabilities the facts or
circumstances underlying which are caused solely by the operation of the
Business after the Closing Date.
(b) Subject to the further provisions of this Article XII, each member of
-----------
the Shareholder Group shall, severally and not jointly, indemnify the Purchaser
Indemnified Persons for, and hold each of them harmless from and against, any
and all Purchaser Losses arising from or in connection with any of the
following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of such member of the Shareholder Group contained in Article VIII
of this Agreement or in any certificate delivered by such member of the
Shareholder Group (in his or its capacity as a shareholder of the Company)
in connection herewith or therewith at or before the Closing (or any facts
or circumstances constituting any such untruth, inaccuracy or breach); and
(ii) the breach of any agreement or covenant of such member of the
Shareholder Group contained in this Agreement or any Related Document.
(c) Subject to the further terms of this Article XII, the Purchaser shall
-----------
indemnify the Seller Indemnified Persons for, and hold each of them harmless
from and against, any and all Seller Losses arising from or in connection with
any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of the Purchaser contained in this Agreement or any Related
Document or any certificate delivered by the Purchaser in connection
herewith or therewith at or before the Closing (or any facts or
circumstances constituting any such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of the Purchaser
contained in this Agreement or any Related Document;
55
<PAGE>
(iii) the Assumed Liabilities; and
(iv) the diminution in the fair market value of the Pacer Shares
from their value on the date hereof resulting from any untrue statement of
a material fact contained in the Pacer Registration Statement or from any
omission from the Pacer Registration Statement of a material fact necessary
to make the statements contained in the Pacer Registration Statement, in
light of the circumstances under which they were made, not misleading, in
each case as of the effective date of the Pacer Registration Statement
(provided that no member of the Seller Group had actual knowledge of such
untrue statement or omission prior to the Closing).
12.2 Assertion of Claims.
-------------------
No claim for indemnification shall be brought under Section 12.1 for a
------------
breach of a representation or warranty unless the Indemnified Persons, or any of
them, at any time prior to the applicable Survival Date, give the Indemnifying
Persons (a) written notice of the existence of any such claim, specifying the
nature and basis of such claim and the amount thereof, to the extent known or
(b) written notice pursuant to Section 12.3 of any Third Party Claim, the
------------
existence of which might give rise to such a claim for indemnification. No
claim for indemnification under Section 12.1(c)(iv) shall be brought by any
-------------------
Seller Indemnified Person at any time after the third anniversary of the Closing
Date. Upon the giving of such written notice as aforesaid, the Indemnified
Persons, or any of them, shall have the right to commence legal proceedings
subsequent to the Survival Date for the enforcement of their rights under
Section 12.1.
- ------------
12.3 Notice and Defense of Third Party Claims.
----------------------------------------
The obligations and liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of liability by third parties (each, a
"Third Party Claim") shall be subject to the terms and conditions set forth
- ------------------
below.
(a) The Indemnified Persons shall promptly give written notice to the
Indemnifying Persons of any Third Party Claim which might give rise to any Loss
by the Indemnified Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent known; provided, however, that no
-------- -------
delay on the part of the Indemnified Persons in notifying any Indemnifying
Persons shall relieve the Indemnifying Persons from any liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Person thereby
is prejudiced by the delay. Such notice shall be accompanied by copies of all
relevant documentation with respect to such Third Party Claim, including any
summons, complaint or other pleading which may have been served, any written
demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that such Third Party Claim is properly
subject to their indemnification obligations hereunder, then the Indemnifying
Persons shall have the right to assume the defense of any Third Party Claim at
their own expense and by their own counsel, which counsel shall be reasonably
satisfactory to the Indemnified Persons; provided, however, that the
-------- -------
Indemnifying Persons shall not have the right to assume the defense of any Third
Party Claim, notwithstanding
56
<PAGE>
the giving of such written acknowledgment, if (i) the Indemnified Persons shall
have been advised 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 Persons, and, in the reasonable opinion of the
Indemnified Persons, counsel for the Indemnifying Persons could not adequately
represent the interests of the Indemnified Persons because such interests could
be in conflict with those of the Indemnifying Persons, (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 Persons
or (iii) the Indemnifying Persons shall not have assumed the defense of the
Third Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to Section 12.3(b) is not
---------------
applicable), the Indemnifying Persons shall not be responsible for any legal or
other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not exercise
their right to assume the defense of a Third Party Claim by giving the written
acknowledgment referred to in Section 12.3(b), or are otherwise restricted from
---------------
so assuming by the proviso to Section 12.3(b), the Indemnifying Persons shall
---------------
nevertheless be entitled to participate in such defense with their own counsel
and at their own expense. If the defense of a Third Party Claim is assumed by
the Indemnified Persons pursuant to clause (i) or (ii) of the proviso to Section
-------
12.3(b), the Indemnified Persons shall not be entitled to settle such Third
- -------
Party Claim without the prior written consent of the Indemnifying Persons, which
consent shall not be unreasonably withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim pursuant to Section 12.3(b), (i) the Indemnified
---------------
Persons shall be entitled to participate in such defense with their own counsel
at their own expense and (ii) the Indemnifying Persons shall not make any
settlement of any claims without the written consent of the Indemnified Persons,
which consent shall not be unreasonably withheld or delayed.
12.4 Survival of Representations and Warranties.
------------------------------------------
Subject to the further provisions of this Section 12.4, the representations
------------
and warranties of the Seller Group contained in Article VII of this Agreement or
-----------
in any certificate or other writing delivered in connection with this Agreement
shall survive the Closing, and shall expire and be of no further force or effect
on the third anniversary of the Closing Date; provided, however, that the
-------- -------
representations and warranties contained in Sections 7.1, 7.2, 7.3, 7.10 and
------------ --- --- ----
7.20 shall survive the Closing indefinitely and the representations and
- ----
warranties contained in Sections 7.9, 7.18 and 7.19 shall survive the Closing
------------ ---- ----
until ninety (90) days after the expiration of the applicable statutes of
limitations for claims applicable to the matters covered thereby. The
representations and warranties of the Shareholders Group contained in Article
-------
VIII and the representations and warranties of the Purchaser contained in
- ----
Article IX shall survive the Closing indefinitely. The covenants and other
- ----------
agreements of each of the Companies, the Shareholders, Keller, Uchida and the
Purchaser contained in this Agreement shall survive the Closing until they are
otherwise terminated by their terms (provided that the Purchaser's covenant to
indemnify the Seller Indemnified Persons pursuant to, and for the matters
described in, Section 12.1(c)(iv) shall expire and be of no further force or
-------------------
effect on and after the third anniversary of the Closing Date (except for
indemnification claims thereunder asserted in writing prior
57
<PAGE>
thereto)). For convenience of reference, the date upon which any representation
or warranty contained herein shall terminate, if any, is referred to herein as
the "Survival Date."
-------------
12.5 Limitations on Indemnification.
------------------------------
(a) Indemnity Baskets for the Companies. From and after the Closing,
-----------------------------------
the Purchaser Indemnified Persons shall not have the right to be indemnified for
breaches of representations and warranties of the Seller Group pursuant to
Section 12.1(a) unless and until the Purchaser Indemnified Persons (or any
- ---------------
member thereof) shall have incurred on a cumulative basis aggregate Losses in an
amount exceeding $300,000, whereupon the Purchaser Indemnified Persons (or any
member thereof) shall be entitled to be indemnified for all Losses incurred by
them; provided, however, that in no event shall the limitations set forth in
-------- -------
this Section 12.5(a) apply with respect to (i) any willful or knowing breach of
---------------
such representations or warranties or (ii) any breaches of those representations
and warranties contained in Sections 7.1, 7.2, 7.3, 7.9, 7.10, 7.18, 7.19 or
-------- --- --- --- --- --- ---- ----
7.20.
- ----
(b) Indemnity Limitations for the Companies and the Shareholders. From
------------------------------------------------------------
and after the Closing, the sum of all Losses pursuant to which indemnification
is payable by any member of the Seller Group for breaches of representations and
warranties of the Seller Group pursuant to Section 12.1(a) shall not exceed the
---------------
Purchase Price; provided, however, that in no event shall the limitations set
forth in this Section 12.5(b) apply with respect to (i) any willful or knowing
---------------
breach of any of the foregoing representations and warranties and (ii) any
breaches of those representations and warranties contained in Sections 7.1, 7.2,
------------ ---
7.3, 7.9, 7.10 or 7.20.
- --- --- ---- ----
(c) Indemnity Basket for the Purchaser. The Seller Indemnified Persons
----------------------------------
shall not have the right to be indemnified pursuant to Section 12.1(c)(iv)
-------------------
unless and until the Seller Indemnified Persons (or any member thereof) shall
have incurred on a cumulative basis aggregate Losses otherwise subject to
indemnification pursuant to Section 12.1(c)(iv) in an amount exceeding $50,000,
-------------------
whereupon the Seller Indemnified Persons (or any member thereof) shall be
entitled to be indemnified for all Losses incurred by them and that are subject
to indemnification pursuant to Section 12.1(c)(iv); provided, however, that in
------------------- -------- -------
no event shall the limitation set forth in this Section 12.5(c) apply with
---------------
respect to any willful or knowing untrue statement or omission that is subject
to indemnification pursuant to Section 12.1(c)(iv).
-------------------
(d) Indemnity Limitation for the Purchaser. The sum of all Losses
--------------------------------------
pursuant to which indemnification is payable by the Purchaser under Section
-------
12.1(c)(iv) shall not exceed the Pacer Shares Portion.
- -----------
12.6 Satisfaction of Indemnification Obligations.
-------------------------------------------
The obligations of each member of the Seller Group pursuant to Section
-------
12.1 to indemnify the Purchaser Indemnified Persons for Purchaser Losses shall
- ----
be satisfied in the following manner: (a) an amount equal to the Cash Portion
Percentage of each such Purchaser Loss shall be paid in cash by the Seller Group
to the Purchaser Indemnified Persons by wire transfer of immediately available
funds to the account or accounts specified by the Purchaser for such purposes;
(b) an amount equal to the Note Portion Percentage of each such Purchaser Loss
shall be paid by the surrender to the Purchaser for no consideration of Seller
Notes, to the extent then outstanding, in the aggregate principal amount
(determined in order of maturity) equal to
58
<PAGE>
such Purchaser Loss; (c) an amount equal to the Pacer Shares Portion Percentage
of each such Purchaser Loss shall be paid by the surrender to the Purchaser for
no consideration of (x) prior to the completion of a Pacer IPO that number of
Pacer Shares, to the extent then outstanding, having an aggregate value on the
Closing Date equal to such amount (it being agreed that for purposes of this
Section 12.6 on the Closing Date the aggregate value of the Pacer Shares is
- ------------
$6,000,000 and the per share value of the Pacer Shares is $20.00 per share) or
(y) after the completion of a Pacer IPO, that number of Pacer Shares, to the
extent then outstanding, having an aggregate fair market value as of the date
such indemnification claim was made equal to such amount (such per share fair
market value being calculated as the average of the closing prices of the Pacer
common stock on the five (5) trading days on which sales of Pacer common stock
took place immediately preceding the date of determination); and (d) after the
application of clauses (a), (b) and (c) above, the unpaid balance, if any, of
each such Purchaser Loss shall be satisfied in full by cash payment in the
manner provided in clause (a) of this sentence. As used herein: (i) the term
"Cash Portion Percentage" means the fraction, expressed as a percentage, the
numerator of which is the Cash Portion of the Purchase Price and the denominator
of which is the Purchase Price less the Assumed Liabilities Portion; (ii) the
term "Note Portion Percentage" means the fraction, expressed as a percentage,
the numerator of which is the Note Portion of the Purchase Price and the
denominator of which is the Purchase Price less the Assumed Liabilities Portion;
and (iii) the term "Pacer Shares Portion Percentage" means the fraction,
expressed as a percentage, the numerator of which is the Pacer Shares Portion of
the Purchase Price and the denominator of which is the Purchase Price less the
Assumed Liabilities Portion. Notwithstanding anything to the contrary contained
herein, in the event of any breach or default of the foregoing provisions by any
member of the Seller Group the Purchaser Indemnified Persons shall have the
right to set-off against amounts owed by any member of the Purchaser Indemnified
Persons to any member of the Seller Group (a) any amount owed by any member of
the Seller Group to any member of the Purchaser Indemnified Persons under this
Agreement, the Related Documents or otherwise and (b) any Losses incurred as a
result of the indemnification events set forth in Sections 12.1(a) or 12.1(b).
---------------- -------
In the event of the election by the Purchaser Indemnified Persons (or any member
thereof) to exercise any right of set-off under this paragraph, the Purchaser
shall deliver a written notice to the Seller Group specifying the specific right
of set-off to be exercised and the amount thereof. When used in this Section
-------
12.6, the term "Pacer Shares" shall mean the Pacer Shares issued at the Closing
- ----
as well as any and all other shares of capital stock or securities of Pacer into
or for which Pacer Shares may have been converted or exchanged in any way, with
appropriate adjustments to be made in the per share or other unit value of such
other shares of capital stock or other securities. Any certificate or other
instrument representing Pacer Shares shall be appropriately legended for the
provisions of this Section 12.6.
------------
ARTICLE XIII
TERMINATION; EFFECT OF TERMINATION
13.1 Termination.
-----------
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual consent of the Purchaser and each Company; or
59
<PAGE>
(b) the Purchaser, if there has been a breach by any Company or
either Shareholder of any representation, warranty, covenant or agreement set
forth in this Agreement which such breaching party fails to cure within ten (10)
Business Days after notice thereof is given by the Purchaser (except no cure
period shall be provided for any such breach that by its nature cannot be
cured); or
(c) any Company, if there has been a breach by the Purchaser of any
representation, warranty, covenant or agreement set forth in this Agreement
which the Purchaser fails to cure within ten (10) Business Days after notice
thereof is given by such Company (except no cure period shall be provided for
any such breach that by its nature cannot be cured); or
(d) the Purchaser, if the conditions set forth in Section 11.1 or
------------
11.2 shall not have been satisfied or waived by the Purchaser by January 31,
- ----
2000 (the "Termination Date"); or
----------------
(e) any Company, if the conditions set forth in Section 11.1 or 11.3
------------ ----
shall not have been satisfied or waived by each Company by the Termination Date;
or
(f) the Purchaser or any Company if any permanent injunction or
other Order of a court or other competent authority preventing the Closing shall
have become final and non-appealable; provided, however, that neither the
-------- -------
Purchaser nor any Company shall be entitled to terminate this Agreement pursuant
to clause (d) or clause (e) of this Section 13.1 if such party's intentional
---------- ---------- ------------
breach (or, with respect to such termination by any Company, any Shareholder's
intentional breach) of this Agreement has prevented the satisfaction of any such
condition. Any termination pursuant to clause (a) of this Section 13.1 shall be
---------- ------------
effected by a written instrument signed by the Purchaser and each Company, and
any termination pursuant to this Section 13.1 (other than a termination pursuant
------------
to clause (i)) shall be effected by written notice from the party or parties so
----------
terminating to the other parties hereto, which notice shall specify the Section
of this Agreement pursuant to which this Agreement is being terminated.
13.2 Effect of Termination.
---------------------
In the event of the termination of this Agreement pursuant to Section
-------
13.1, this Agreement shall be of no further force or effect, except for Section
- ---- -------
10.10, this Section 13.2 and Article XIV, each of which shall survive the
- ----- ------------ -----------
termination of this Agreement; provided, however, that the Liability of any
-------- -------
party for any breach by such party of the representations, warranties, covenants
or agreements of such party set forth in this Agreement occurring prior to the
termination of this Agreement shall survive the termination of this Agreement
and, in addition, in the event of any action for breach of contract in the event
of a termination of this Agreement, the prevailing party shall be reimbursed by
the other party to the action for reasonable attorneys' fees and expenses
relating to such action.
60
<PAGE>
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Amendment.
---------
This Agreement may not be altered or otherwise amended except pursuant to
an instrument in writing signed by each party, except that any party may waive
any obligation owed to it by another party under this Agreement. No waiver by
any party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
14.2 Entire Agreement.
----------------
This Agreement and the other agreements and documents referenced herein
(including the Schedules and the Exhibits (in their executed form) attached
hereto) and any other document or agreement contemporaneously entered into with
this Agreement contain all of the agreements among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements or understandings among the parties with respect thereto.
14.3 Severability.
------------
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
14.4 Benefits of Agreement.
---------------------
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Except as expressly provided herein, this Agreement shall not
confer any rights or remedies upon any Person other than the foregoing.
Notwithstanding anything contained herein to the contrary, this Agreement shall
not be assignable by any Company or the Shareholders without the express written
consent of the Purchaser. The Purchaser may, without the consent of any other
party hereto, (a) assign any or all of its rights and interests hereunder to one
or more of its Affiliates and designate one or more of its Affiliates to perform
its obligations hereunder and (b) assign any or all of its rights and interests
hereunder as security for any obligations arising in connection with the
financing of the transactions contemplated hereby, in any or all of which cases
the Purchaser nonetheless shall remain responsible for the performance.
61
<PAGE>
14.5 Expenses; Sales and Transfer Taxes.
----------------------------------
The Purchaser on the one hand and the Companies and the Shareholders on
the other hand shall each bear their own expenses incurred in connection with
this Agreement and the Related Documents (including the legal and due diligence
fees, costs and expenses incurred by such party and audit fees incurred by each
Company). The Companies shall pay all sales, use, gains and excise taxes and all
registration, or transfer taxes which may be payable in connection with the
transactions contemplated by this Agreement and the Related Documents.
14.6 Remedies.
--------
The parties shall each have and retain all rights and remedies existing in
their favor under this Agreement, at law or in equity, including rights to bring
actions for specific performance and injunctive and other equitable relief
(including the remedy of rescission) to enforce or prevent a breach or violation
of any provision of this Agreement, and all such rights and remedies shall, to
the extent permitted by applicable Law, be cumulative and a party's pursuit of
any such right or remedy shall not preclude such party from exercising or
pursuing any other available right or remedy.
14.7 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:
Conex Global Logistics Services, Inc.
550 S. Alameda Street
Compton, California 90221
Attention: Messrs. Michael Keller and Shigehiro Uchida
Telephone No.: 310-884-6700
Facsimile No.: 310-886-3394
with a copy to:
Crosby, Heafey, Roach & May
700 South Flowers Street, 22nd Floor
Los Angeles,California 90017
Attention: Richard Lasater, Esq.
Telephone No.: 213-896-8025
Facsimile No.: 213-896-8080
(b) if to Keller or the Keller Trust, to:
Michael Keller
2621 Tuscany Way
62
<PAGE>
Fullerton, California 92835
Telephone No.: 714-255-1982
Facsimile No.: 714-255-1919
with a copy to:
Crosby, Heafey, Roach & May
700 South Flowers Street, 22nd Floor
Los Angeles, California 90017
Attention: Richard Lasater, Esq.
Telephone No.: 213-896-8025
Facsimile No.: 213-896-8080
(c) if to Uchida or the Uchida Trust, to
Shigehiro Uchida
9 Peacock Lane
Rolling Hills Estates, California 90274
Telephone No.: 310-539-7405
Facsimile No.: 310-539-0492
with a copy to:
Crosby, Heafey, Roach & May
700 South Flowers Street, 22nd Floor
Los Angeles, California 90017
Attention: Richard Lasater, Esq.
Telephone No.: 213-896-8025
Facsimile No.: 213-896-8080
(d) if to the Purchaser, to:
Conex Acquisition Corporation
c/o Pacer International, Inc.
1340 Treat Boulevard, Suite 200
Walnut Creek, California 94596
Attention: Larry Yarberry
Telephone No.: 925-979-4480
Facsimile No.: 925-979-4215
63
<PAGE>
with a copy to:
Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Attention: Joshua Harris
Telephone No.: 212-261-4032
Telephone No.: 212-261-4102
and a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, NY 10112
Attention: John J. Suydam, Esq.
Telephone No.: 212-408-2400
Facsimile No.: 212-728-5950.
All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in
the case of delivery by nationally-recognized, overnight courier, on the
Business Day following dispatch, and (iv) in the case of mailing, on the third
Business Day following such mailing.
14.8 Counterparts and Facsimile Execution.
------------------------------------
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
(by facsimile or otherwise) to the other party, it being understood that all
parties need not sign the same counterpart. Any counterpart or other signature
hereupon delivered by facsimile shall be deemed for all purposes as constituting
good and valid execution and delivery of this Agreement by such party.
14.9 Governing Law.
--------------
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA, OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF CALIFORNIA TO BE APPLIED. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED
DOCUMENT.
64
<PAGE>
14.10 Jurisdiction and Venue.
----------------------
(a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself or himself and its or his property, to the exclusive
jurisdiction of any California state court or federal court of the United States
of America sitting in Los Angeles or San Francisco, California, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, the Related Documents or the transactions
contemplated hereunder or thereunder or for recognition or enforcement of any
judgment relating thereto, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such California state court or, to
the extent permitted by law, in any such federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it or he may legally and effectively do so, any objection
that it or he may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement, the Related
Documents or the transactions contemplated hereunder or thereunder in any
California state or federal court of the United States of America sitting in Los
Angeles or San Francisco, California. Each of the parties hereto irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) The parties hereto further agree that the mailing by certified or
registered mail, return receipt requested, of any process required by any such
court shall constitute valid and lawful service of process against them, without
the necessity for service by any other means provided by law.
14.11 MUTUAL WAIVER OF JURY TRIAL.
---------------------------
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
14.12 Mutual Contribution.
-------------------
The parties to this Agreement and their counsel have mutually contributed
to its drafting. Consequently, no provision of this Agreement shall be construed
against any party on the ground that a party drafted the provision or caused it
to be drafted.
14.13 No Third-Party Beneficiaries.
----------------------------
Except as expressly provided herein (including Section 7.27 and, with
------------
respect to Indemnified Persons, Article XII), this Agreement shall not confer
-----------
any rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns.
65
<PAGE>
14.14 Independence of Covenants and Representations and Warranties.
------------------------------------------------------------
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached shall not affect the incorrectness of or a breach
of a representation and warranty hereunder.
14.15 Interpretation; Construction.
----------------------------
The term "Agreement" means this agreement together with all Schedules and
---------
Exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. Certain
capitalized terms used and not otherwise defined elsewhere in this Agreement
have the meanings given to them in Annex I attached hereto. In this Agreement,
-------
the term "Best Knowledge" of any Person means (a) the actual knowledge of such
--------------
Person and (b) that knowledge which should have been acquired by such Person
after making such due inquiry and exercising such due diligence as a prudent
businessperson would have made or exercised in the management of his or her
business affairs, including due inquiry of those officers, directors, key
employees and professional advisers (including attorneys, accountants and
consultants) of such Person who could reasonably be expected to have actual
knowledge of the matters in question. For purposes of the preceding sentence,
the knowledge, both actual and constructive, of each Shareholder, Keller and
Uchida shall be imputed to each Company. The use in this Agreement of the term
"including" means "including, without limitation." The words "herein",
"hereof", "hereunder", "hereby", "hereto", "hereinafter", and other words of
similar import refer to this Agreement as a whole, including the Schedules and
Exhibits, as the same may from time to time be amended, modified, supplemented
or restated, and not to any particular article, section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to articles,
sections, subsections, clauses, paragraphs, Schedules and Exhibits mean such
provisions of this Agreement and the Schedules and Exhibits attached to this
Agreement, except where otherwise stated. The title of and the article, section
and paragraph headings in this Agreement are for convenience of reference only
and shall not govern or affect the interpretation of any of the terms or
provisions of this Agreement. The use herein of the masculine, feminine or
neuter forms shall also denote the other forms, as in each case the context may
require. Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement has been
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. Accounting terms used but not
otherwise defined herein shall have the meanings given to them under GAAP.
Unless expressly provided otherwise, the measure of a period of one month or
year for purposes of this Agreement shall be that date of the following month or
year corresponding to the starting date, provided that if no corresponding date
exists, the measure shall be that date of the following month or year
corresponding to the next day following the starting date. For example, one
month following February 18 is March 18, and one month following March 31 is May
1.
66
<PAGE>
*********
67
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first written above.
CONEX ACQUISITION CORPORATION THE SHAREHOLDERS:
By:_________________________________ _________________________________
Name: Larry Yarberry Michael Keller
Title: Secretary
CONEX GLOBAL LOGISTICS SERVICES, INC. THE MICHAEL W. KELLER LIVING TRUST
By:_________________________________ By:_________________________________
Name: Name:
Title: Title: Trustee
MSL TRANSPORTATION GROUP, INC. _________________________________
Shigehiro Uchida
By:_________________________________
Name:
Title: THE UCHIDA FAMILY TRUST
JUPITER FREIGHT, INC. By:______________________________
Name:
Title: Trustee
By:_________________________________
Name:
Title:
<PAGE>
ANNEX I
Certain Definitions
--------------------
"Acquisition Proposal" means any offer, proposal or indication of interest
--------------------
in (i) the direct or indirect acquisition of all or any material part of any
Company, (ii) a merger, consolidation or other business combination directly or
indirectly involving any Company or (iii) the direct or indirect acquisition of
any capital stock of any Company.
"Affiliate" means, with respect to any Person, (i) a director, officer or
---------
shareholder of such Person, (ii) a spouse, parent, sibling or descendant of such
Person (or spouse, parent, sibling or descendant of any director or executive
officer of such Person) and (iii) any other Person that, directly or indirectly
through one or more intermediaries, Controls, or is Controlled by, or is under
common Control with, such Person.
"Assigned Contracts" means, collectively, all Contracts to which any
------------------
Company is a party or by which any Company or any of its assets, properties, or
rights is bound or subject, including the Material Contracts, but excluding the
Excluded Contracts.
"Business Day" means any day that is not a Saturday, Sunday or a day on
------------
which banking institutions in New York, New York are not required to be open.
"Capital Lease" means any obligation to pay rent or other amounts under any
-------------
lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person
as of such date computed in accordance with GAAP.
"Charter Documents" means, as to any corporation, the articles, certificate
-----------------
or memorandum of incorporation or association of such corporation, the by-laws
of such corporation, and each other instrument or other document governing such
corporation's existence and internal affairs, in each case as amended and
restated and in effect at the time in question.
"Contract" means any loan or credit agreement, note, bond, mortgage,
--------
indenture, license, lease, sublease, grant of easement, right of way, permit or
concession, purchase, sales or service order, or other contract agreement,
commitment, instrument, franchise, or license, whether written or oral.
"Control" means, with respect to any Person, the possession, directly or
-------
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Employee Benefit Plan" means (i) any qualified or non-qualified Employee
---------------------
Pension Benefit Plan (as defined in Section 3(2) of ERISA), including any
Multiemployer Plan or Multiple Employer Plan, (ii) any Employee Welfare Benefit
Plan (as defined in Section 3(1) of ERISA) or (iii) any employee benefit, fringe
benefit, compensation, severance, incentive, bonus, profit-sharing, stock
option, stock purchase or other plan, program or arrangement, whether or not
subject to ERISA and whether or not funded.
I-I
<PAGE>
"Encumbrances" shall mean and include security interests, mortgages, liens,
------------
pledges, charges, easements, reservations, restrictions, rights of way,
servitudes, options, rights of first refusal, community property interests,
equitable interests, restrictions of any kind and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"Environmental, Health and Safety Laws" means all Laws, Permits, Orders and
-------------------------------------
Contracts and all common law relating to or addressing pollution or protection
of the environment, public health and safety, or employee health and safety,
including all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control or cleanup
of any hazardous materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
each as amended and as now or hereafter in effect.
"ERISA Affiliate" means, with respect to any Person, any other Person that
---------------
is a member of a "controlled group of corporations" with, or is under "common
-------------------------------- ------
control" with, or is a member of the same "affiliated service group" with such
- ------- ------------------------
Person as defined in Section 414(b), 414(c), or 414(m) or 414(o) of the Code.
"Excluded Contracts" means, collectively, all Contracts set forth on
------------------
Schedule I.
- ----------
"Funded Indebtedness" means, without duplication, the aggregate amount
-------------------
(including the current portions thereof) of all (i) indebtedness for money
borrowed from others (including any prepayment and similar penalties) and
purchase money indebtedness (other than accounts payable in the ordinary
course); (ii) indebtedness of the type described in clause (i) above guaranteed,
directly or indirectly, in any manner by any Company or in effect guaranteed,
directly or indirectly, in any manner by any Company through an agreement,
contingent or otherwise, to supply funds to, or in any other manner invest in,
the debtor, or to purchase indebtedness, or to purchase and pay for property if
not delivered or pay for services if not performed, primarily for the purpose of
enabling the debtor to make payment of the indebtedness or to assure the owners
of the indebtedness against loss (any such arrangement being hereinafter
referred to as a "Guaranty") (but the term "Guaranty" shall exclude endorsements
--------
of checks and other instruments in the ordinary course); (iii) all indebtedness
of the type described in clause (i) above secured by any Encumbrance upon
property owned by any Company even though the Company has not in any manner
become liable for the payment of such indebtedness; (iv) Capital Leases and (v)
all interest expense and other charges accrued but unpaid, and all prepayment
premiums, on or relating to any of such indebtedness. Funded Indebtedness of
the Company as of the date hereof is set forth on Schedule 7.13(d) hereof.
-----------------
"GAAP" means generally accepted accounting principles in the United States
----
as promulgated by the AICPA applied on a basis consistent with the preparation
of the Audited Financial Statements.
"Governmental Entity" means any governmental authority or instrumentality,
-------------------
whether federal, state, local or foreign and whether legislative, executive,
judicial or otherwise.
"Guaranty" has the meaning given to it in the definition of Funded
--------
Indebtedness.
1-2
<PAGE>
"Health Plans" means the group health plans of the Companies listed on
------------
Schedule II attached hereto.
"Income Taxes" means all income Taxes (including any Tax on or based upon
------------
net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits (including state taxes imposed on
subchapter S corporations)).
"Indemnified Persons" means and includes the Seller Indemnified Persons
-------------------
and/or the Purchaser Indemnified Persons, as the case may be.
"Indemnifying Persons" means and includes the Seller Indemnifying Persons
--------------------
and/or the Purchaser Indemnifying Persons, as the case may be.
"Intellectual Property Rights" means all intellectual property rights,
----------------------------
including patents, patent applications, trademarks, trademark applications,
trade names, service marks, service mark applications, trade dress, logos and
designs and the goodwill connected with the foregoing, copyrights and copyright
applications, know-how, trade secrets, proprietary processes and formulae,
confidential information, franchises, licenses, inventions, instructions,
marketing materials and all documentation and media constituting, describing or
relating to the foregoing, including manuals, memoranda and records.
"Law" means any applicable foreign, federal, state or local law, statute,
---
treaty, rule, directive, regulation, ordinances and similar provisions having
the force or effect of law or an Order of any Governmental Entity (including all
Environmental, Health and Safety Laws).
"Liability" means any actual or potential 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.
"Litigation Expense" means any out-of-pocket expenses incurred in
------------------
connection with investigating, defending or asserting any claim, legal or
administrative action, suit or Proceeding incident to any matter indemnified
against hereunder including court filing fees, court costs, arbitration fees or
costs, witness fees and fees and disbursements of outside legal counsel,
investigators, expert witnesses, accountants and other professionals.
"Losses" means any and all losses (including a diminution in the value of
------
the Purchaser's capital stock), claims, shortages, damages, expenses (including
reasonable attorneys' and accountants' and other professionals' fees and
Litigation Expenses), assessments, Taxes (including interest or penalties
thereon) and insurance premium increases (net of insurance proceeds actually
received by the Purchaser in connection with such matter) arising from or in
connection with any such matter that is the subject of indemnification under
Article XII. For purposes of calculating the amount of losses incurred by the
- -----------
Purchaser Indemnified Persons for which the Seller Group is obligated to
indemnify the Purchaser Indemnified Persons, such amount shall be computed as
the product of (i) the actual amount of Losses incurred by the Purchaser
Indemnified Persons multiplied by the quotient obtained by dividing the Purchase
Price by (ii) the Adjusted EBIT of the Companies for the fiscal year ended
December 31, 1998.
I-3
<PAGE>
"Orders" means judgments, writs, decrees, compliance agreements,
------
injunctions or judicial or administrative orders and determinations of any
Governmental Entity or arbitrator.
"Pacer IPO" means the initial public offering of shares of common stock of
---------
Pacer registered under the Securities Act (other than on Form S-4 or Form S-8
(or any successor forms) promulgated thereunder).
"Pacer Registration Statement" means the registration statement on Form S-4
----------------------------
filed by Pacer with the Securities and Exchange Commission, registration number
333-85041, and declared effective on November 5, 1999.
"Pacer Shareholders' Agreement" means the Shareholders' Agreement dated as
-----------------------------
of May 28, 1999, as the same may be amended or modified, among Pacer, Coyote
Acquisition, LLC, Coyote Acquisition II LLC, and the individual shareholders of
Pacer party thereto.
"Permits" means any and all permits, licenses, concessions, authorizations,
-------
registrations, franchises, approvals, consents, certificates, variances and
similar rights obtained, or required to be obtained, from a Governmental Entity.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due and
----------------------
payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Person" shall be construed broadly and shall include an individual, a
------
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
Governmental Entity (or any department, agency or political subdivision
thereof).
"Proceedings" means any action, suit, investigation, claim or proceedings
-----------
before any Governmental Entity or arbitrator.
"Purchaser Indemnified Persons" means and includes the Purchaser and its
-----------------------------
Affiliates, their respective successors and assigns, and the respective
officers, directors and controlling parties of each of the foregoing; provided,
--------
however, that any such Person who was, prior to the Closing Date, an officer,
- -------
director, employee, Affiliate, successor or assign of any Company shall not in
such capacity be a Purchaser Indemnified Person with respect to a breach of this
Agreement or any Related Document based on facts or circumstances occurring, or
actions taken by such Person, at or prior to the Closing.
"Purchaser Indemnifying Persons" means the Purchaser and its successors.
------------------------------
"Purchaser Losses" means any and all Losses sustained, suffered or incurred
----------------
by any Purchaser Indemnified Person arising from or in connection with any such
matter which is the subject of indemnification under Article XII.
-----------
I-4
<PAGE>
"Related Documents" means, collectively, the Bills of Sale, the Assumption
-----------------
Agreement, the Seller Notes, the Keller Employment Agreement, the Uchida
Employment Agreement, the Uchida Consulting Agreement, the Leases, and the
Joinder Agreements.
"Securities" means "securities" as defined in Section 2(1) of the
---------- ---------- -------------
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Seller Group" has the meaning given to it in the caption on the first page
------------
of this Agreement.
"Seller Indemnified Persons" means and includes each Company, the
--------------------------
Shareholders and their respective Affiliates, officers, directors, estates,
heirs, successors and assigns.
"Seller Indemnifying Persons" means and includes each Company, the
---------------------------
Shareholders and their respective heirs, estates, successors and assigns.
"Seller Losses" shall mean any and all Losses sustained, suffered or
-------------
incurred by any Seller Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under Article XII.
-----------
"Subsidiary" of any Person means any other Person (i) whose Securities
----------
having a majority of the general voting power in electing the board of directors
or equivalent governing body of such other Person (excluding Securities entitled
to vote only upon the failure to pay dividends thereon or the occurrence of
other contingencies) are, at the time as of which any determination is being
made, owned by such Person either directly or indirectly through one or more
other entities constituting Subsidiaries or (ii) a 50% interest in the profits
or capital of whom is, at the time as of which any determination is being made,
owned by such Person either directly or indirectly through one or more other
entities constituting Subsidiaries.
"Tax Return" means any return, declaration, report, claim for refund, or
----------
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxes" means, with respect to any Person, (i) all Income Taxes and all
-----
gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, alternative or add-on minimum taxes, customs
duties and other taxes, fees, assessments or charges of any kind whatsoever,
together with all interest and penalties, additions to tax and other additional
amounts imposed by any taxing authority (domestic or foreign) on such Person (if
any) and (ii) any liability for the payment of any amount of the type described
in clause (i) above as a result of (A) being a "transferee" (within the meaning
----------
of Section 6901 of the Code or any other applicable Law) of another Person, (B)
being a member of an affiliated, combined or consolidated group or (C) a
contractual arrangement or otherwise.
********
I-5
<PAGE>
ANNEX II
Adjusted EBIT
-------------
As used in and for purposes of this Agreement:
(a) "1999 Adjusted EBIT" of the Companies means the combined income
------------------
from operations of the Companies for the period from and including January 1,
1999, through and including December 31, 1999, as set forth on the 1999 Income
Statement as finally adjusted, if at all, pursuant to Section 5.1(c) of this
Agreement, determined and computed in accordance with GAAP and subject to
adjustment for those items listed on Annex II-A attached hereto, to the extent
----------
such items were taken into account in computing such income from operations. By
way of example, Annex II-A attached hereto sets forth the computation of the
----------
"Adjusted EBIT" of the Companies on a combined basis for the fiscal year ended
December 31, 1998, and for the nine months ended September 30, 1999. In
computing the 1999 Adjusted EBIT, the adjustments for those items set forth on
Annex II-A shall be made on a basis consistent with the adjustments made on
- ----------
Annex II-A in computing the "Adjusted EBIT" of the Companies on a combined basis
- ----------
for the fiscal year ended December 31, 1998, and for the nine months ended
September 30, 1999.
(b) "2000 Adjusted EBIT" of the Purchaser means the income from
------------------
operations of the Purchaser for the period from and including the Closing Date
through and including December 31, 2000, as set forth on the 2000 Income
Statement as finally adjusted, if at all, pursuant to Section 5.2(c) of this
Agreement, determined and computed in accordance with GAAP. The 2000 Adjusted
EBIT shall not be adjusted for those items listed on Annex II-A attached hereto,
----------
but in computing the 2000 Adjusted EBIT, the Purchaser's income from operations
for such period will be reduced by (i) the net savings realized by the Purchaser
as a result of replacing the Companies' business, property and casualty,
liability and other similar insurance coverages with insurance coverage under
Pacer's policies (using the costs incurred by the Companies in 1999 for and in
connection with maintaining such insurance coverages as a basis for determining
such net savings), and (ii) the net savings realized by the Purchaser as a
result of replacing the Companies' employee benefit plans and programs
(including the Companies' group health, medical, dental, life and AD&D and
disability plans and policies and the Companies' 401(k), profit sharing and
savings plans) with participation in Pacer's employee benefit plans, programs
and policies (using the costs incurred by the Companies in 1999 for and in
connection with maintaining such employee benefit plans, programs and policies
as a basis for determining such net savings).
II-1
<PAGE>
ANNEX II-A
1998 and September 1999 Adjusted EBIT
---------------------------------------
See attached.
II-A-1
<PAGE>
EXHIBIT 2.2
CONEX ACQUISITION CORPORATION
c/o Pacer International Inc.
1340 Treat Boulevard, Suite 200
Walnut Creek, CA 94596
January 12, 2000
To the Seller Group (as defined
in the below-referenced
Asset Purchase Agreement):
Asset Purchase Agreement dated as of
December 31, 1999 (the "Agreement"), among
Conex Acquisition Corporation, Conex Global
Logistics Services, Inc., MSL Transportation Group, Inc.,
Jupiter Freight, Inc., The Michael W. Keller Living Trust,
The Uchida Family Trust, Michael Keller and Shigehiro Uchida
------------------------------------------------------------
Gentlemen:
This letter will serve to set forth our agreement regarding the following
amendments to, and other matters relating to, the Agreement. Accordingly, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, you and we hereby agree as follows:
1. Defined Terms. Capitalized terms used and not defined herein have the
-------------
meanings given to them in the Agreement.
2. Closing Date. The Closing Date will be January 13, 2000. The Closing
------------
Balance Sheet shall be prepared as of the close of business on December 31,
1999. If the Closing occurs, all of the economic benefits and interests in
the Purchased Assets shall be deemed to have been transferred to and owned
by, and all of the obligations of the Assumed Liabilities shall be deemed
to have been assumed by and be obligations of, the Purchaser effective as
of 12:00 a.m. on January 1, 2000, and any changes in the Purchased Assets
and the Assumed Liabilities occurring during the period from and after the
close of business on December 31, 1999, through and including the Closing
Date (including, without limitation, collections of accounts receivable and
payments of accounts payable) shall be for the account of the Purchaser as
if the Closing had occurred effective as of 12:00 a.m. on January 1, 2000;
provided, however, that nothing herein shall affect, or impair the rights
-------- -------
and remedies of the parties with respect to any inaccuracy or breach of,
the representations and warranties made by the parties in the Agreement as
of December
<PAGE>
31, 1999, and as of the Closing Date and the covenants and agreements of
the parties in the Agreement for the period from December 31, 1999, through
the Closing Date.
3. Amendment of Section 5.1(b) of the Agreement. Section 5.1(b) of the
-------------------------------------------- --------------
Agreement is hereby amended by adding the following proviso at the end of
the eighth (8/th/) sentence thereof:
---
"provided, however, that if (I) the difference between the Purchaser's
-------- -------
calculation of the 1999 Adjusted EBIT submitted to the Arbitrating
Accountants and the Arbitrating Accountants' calculation of the 1999
Adjusted EBIT is the same as (II) the difference between the
Companies' calculation of the 1999 Adjusted EBIT submitted to the
Arbitrating Accountants and the Arbitrating Accountants' calculation
of the 1999 Adjusted EBIT, then the Arbitrating Accountants'
calculation of the 1999 Adjusted EBIT shall be the final calculation
of the 1999 Adjusted EBIT for all purposes of this Agreement"
4. Amendment of Section 5.2(b) of the Agreement. Section 5.2(b) of the
-------------------------------------------- --------------
Agreement is hereby amended by adding the following proviso at the end of
the eighth (8/th/) sentence thereof:
---
"provided, however, that if (I) the difference between the Purchaser's
-------- -------
calculation of the 2000 Adjusted EBIT submitted to the Arbitrating
Accountants and the Arbitrating Accountants' calculation of the 2000
Adjusted EBIT is the same as (II) the difference between the
Companies' calculation of the 2000 Adjusted EBIT submitted to the
Arbitrating Accountants and the Arbitrating Accountants' calculation
of the 2000 Adjusted EBIT, then the Arbitrating Accountants'
calculation of the 2000 Adjusted EBIT shall be the final calculation
of the 2000 Adjusted EBIT for all purposes of this Agreement"
5. Amendment of Section 6.2 of the Agreement. Section 6.2 of the Agreement is
----------------------------------------- -----------
hereby amended by adding the following proviso at the end of the eighth
(8/th/) sentence thereof:
---
"provided, however, that if (I) the difference between the Purchaser's
-------- -------
calculation of the Final Net Working Capital submitted to the
Arbitrating Accountants and the Arbitrating Accountants' calculation
of the Final Net Working Capital is the same as (II) the difference
between the Companies' calculation of the Final Net Working Capital
submitted to the Arbitrating Accountants and the Arbitrating
Accountants' calculation of the Final Net Working Capital, then the
Arbitrating Accountants' calculation of the Final Net Working Capital
shall be the final calculation of the Final Net Working Capital for
all purposes of this Agreement"
6. Amendment of Section 11.1 of the Agreement. Section 11.1 of the Agreement
------------------------------------------ ------------
is hereby amended by changing the reference therein to "the Company" to
read "the Companies."
2
<PAGE>
7. Amendment of Section 13.1 of the Agreement. The proviso in Section 13.1 of
------------------------------------------ ------------
the Agreement is hereby amended by changing the reference therein to
"clause (i)" to read "clause (a) of this Section 13.1."
---------- ---------- ------------
8. Conflicts; No Other Amendments. In the event of any conflict between the
------------------------------
express provisions of the Agreement and this letter agreement, the
provisions of this letter agreement shall control. Except as expressly
amended by this letter agreement, the Agreement remains in full and effect
in accordance with its terms.
9. Amendment. This Agreement may not be altered or otherwise amended except
---------
pursuant to an instrument in writing signed by each party.
10. Entire Agreement. This letter agreement and the Agreement together with
----------------
the other agreements and documents referenced therein (including the
Schedules and the Exhibits (in their executed form) attached thereto) and
any written other document or agreement contemporaneously entered into with
this letter agreement and the Agreement contain all of the agreements among
the parties hereto with respect to the transactions contemplated hereby and
thereby and supersede all prior agreements or understandings among the
parties with respect thereto.
11. Benefits of Agreement. All the terms and provisions of this letter
---------------------
agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Except as expressly
provided herein, this letter agreement shall not confer any rights or
remedies upon any Person other than the foregoing. Notwithstanding anything
contained herein to the contrary, this letter agreement shall not be
assignable by any Company or the Shareholders without the express written
consent of the Purchaser. The Purchaser may, without the consent of any
other party hereto, (a) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and designate one or more of its
Affiliates to perform its obligations hereunder and (b) assign any or all
of its rights and interests hereunder as security for any obligations
arising in connection with the financing of the transactions contemplated
hereby, in any or all of which cases the Purchaser nonetheless shall remain
responsible for the performance.
12. Counterparts and Facsimile Execution. This letter agreement may be
------------------------------------
executed in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered (by
facsimile or otherwise) to the other party, it being understood that all
parties need not sign the same counterpart. Any counterpart or other
signature hereupon delivered by facsimile shall be deemed for all purposes
as constituting good and valid execution and delivery of this letter
agreement by such party.
13. Governing Law. THIS LETTER AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE
(WHETHER OF THE STATE OF
3
<PAGE>
CALIFORNIA, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA TO BE APPLIED. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED DOCUMENT.
Please acknowledge your agreement with the foregoing by signing this letter
agreement where provided below, whereon it shall become a binding agreement
between us.
Very truly yours,
CONEX ACQUISITION CORPORATION
By_____________________________________
Name:
Title:
4
<PAGE>
Accepted and Agreed as of
the date first written above:
CONEX GLOBAL LOGISTICS SERVICES, INC. THE SHAREHOLDERS:
By:_________________________________ ________________________________
Name: Michael Keller
Title:
MSL TRANSPORTATION GROUP, INC. THE MICHAEL W. KELLER LIVING
TRUST
By:_________________________________ By:_____________________________
Name: Name:
Title: Title:
JUPITER FREIGHT, INC.
By:_________________________________ ________________________________
Name: Shigehiro Uchida
Title:
THE UCHIDA FAMILY TRUST
By:_____________________________
Name:
Title:
5
<PAGE>
EXHIBIT 99.1
JAN 14,2000 5:31 PACIFIC 8:31 EASTERN
(BW)(CA-PACER-INTERNATIONAL) Pacer Int'l Expands Logistics &
Intermodal Marketing Business With Conex Merger
Business Editors
WALNUT CREEK, Calif.--(BUSINESS WIRE)--Jan. 14, 2000--
Pacer's Eighth Merger in 24 Months Expected to Enhance
Logistics Capabilities, Expand Cross-border Business
Pacer International, Inc. (Pacer), the fast-growing North America freight
transportation and logistics services provider, said it has expanded its
transloading, local-trucking, warehousing and other logistics operations, as
well as its intermodal marketing activities, through a merger with Los Angeles-
based Conex Global Logistics Services, Inc. Conex operates a complementary
business.
Established in 1977, Conex becomes the eighth logistics or transportation
firm to come into the Pacer group in the last 24 months. Its operations are
centered in Los Angeles, San Diego, and Calexico, California; Seattle; and
Atlanta, and it handles some 225,000 loads annually in its various operations.
Pacer Chief Executive Officer Donald C. Orris said the Conex merger is
designed to improve the service, efficiency and scope of Pacer's logistics and
intermodal brokerage operations by enhancing the firm's full-service
capabilities and adding new locations.
"One of the many benefits," he noted, "is that Pacer gains improved access
to the maquiladoras market along the Mexican border and to NAFTA-related
opportunities that can be supported by the Conex operations and secure
facilities in the San Diego area," he said.
New opportunities for Canadian cross-border business are similarly opened
by the Seattle presence, Orris added, and the Atlanta operations will support
European and Caribbean logistics and freight operations. Also, Conex has the
capability to handle refrigerated shipments.
Pacer will continue to operate existing warehouses in the Conex system.
Conex Leaders become Pacer Execs
Conex president and CEO Michael Keller has been made a key member of the
Pacer Logistics executive team, becoming president of Pacer's freight
consolidation and warehousing business, Orris said. Keller is a 28-year veteran
of the transportation industry, with experience in both ocean and intermodal
transportation.
Shigehiro (Steve) Uchida, executive vice president and chairman of Conex,
will also remain involved in Pacer, and has been named an executive vice
president.
Aside from enhancing Pacer's consolidation, local trucking and other
logistics functions, the Conex merger also strengthens Pacer's position as one
of the largest intermodal marketing companies (brokers
<PAGE>
of intermodal transportation) and providers of related logistics services in
North America, Orris said. Incorporating Conex volumes of some 22,000 truckload-
equivalent moves, Pacer's intermodal-marketing-company operations now account
for more than 350,000 moves annually.
From $86.7 million in 1996 on a stand-alone basis, Pacer's revenues
exceeded $1 billion for the 12-month period ended September 17, 1999, on a pro
forma basis after giving effect to the company's previous mergers. Conex
revenues for the 12-month period ended September 30, 1999, were more than $42
million.
Conex also brings to Pacer's logistics and intermodal marketing businesses
a distinguished customer base. "Conex customers have typically been with the
company for ten to 20 years," Orris noted.
Company description - Pacer International is a leading North American
freight transportation and logistics services provider. Its logistics division
offers a broad range of intermodal, trucking, warehousing, consolidation and
other logistics services on a retail basis, all available through a single
organization, Pacer Logistics. Pacer also operates the industry's most extensive
double-stack rail system for the distribution of containerized freight, Pacer
Stacktrain, which it markets on a wholesale basis. Pacer International is
headquartered in Walnut Creek, California, and Pacer Stacktrain is headquartered
in Oakland, California.
Note: Issued by Potash & Company, Oakland, tel. 510/261-1570.
--30--alx/sf* pb/sf
CONTACT: Pacer International,
William M. Hart, EVP-Strategy, 904/613-0870
