Exhibit 10.20
DOMESTIC INCENTIVE AGREEMENT
THIS DOMESTIC INCENTIVE AGREEMENT (the "Agreement") is dated
as of May 4, 1999 by and between CSX Intermodal, Inc., a Delaware corporation,
with offices at 301 West Bay Street, Jacksonville, FL 32202 ("CSXI"), and Pacer
International, Inc., a Delaware corporation, with offices at 1675 Larimer
Street, Suite 620, Denver, CO 80202 ("Pacer").
R E C I T A L S:
WHEREAS, APL Limited, a Delaware corporation ("APL"), and
Coyote Acquisition LLC, a Delaware limited liability company ("Coyote"), have
entered into a Stock Purchase Agreement dated as of March 15, 1999 (the "Stock
Purchase Agreement"), pursuant to which APL has agreed to sell to Coyote, and
Coyote has agreed to purchase from APL, shares of common stock of APL Land
Transport Services, Inc., a Tennessee corporation ("LTS") and, immediately
thereafter, a subsidiary of LTS will be merged with and into Pacer
(collectively, the "Acquisitions").
WHEREAS, in connection with the Acquisitions, APL, Coyote,
LTS, Pacer and CSXI wish to enter into long-term arrangements relating to the
provision of certain transportation and related services.
WHEREAS, simultaneous with the execution of this Agreement,
CSXI, LTS and APL and its affiliates have entered into an Intermodal
Transportation Agreement (the "APL/LTS Agreement").
WHEREAS, CSXI, in conjunction with the APL/LTS Agreement, is
willing to provide certain incentives to Pacer, as set forth herein.
WHEREAS, except as hereafter agreed to by the parties, the
parties hereto intend that the incentive payments made by CSXI to Pacer under
this Agreement will be in addition to, and will not terminate, cancel, diminish
or otherwise affect any incentive payments under any prior or future
transportation services or incentive agreements between CSXI or its Affiliates
and Pacer or any of its Affiliates, including but not limited to LTS.
A G R E E M E N T
In consideration of the terms, conditions and obligations
under this Agreement and other consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. INTERPRETATION.
1.1 Definitions. The following capitalized terms used in this Agreement
will have the following meanings:
1.1.1 "Affiliate" means any entity that, under the principles
of statutory or common law, controls, is controlled by or is under
common control with another entity; "Affiliate" shall not, however,
include (a) entities related to Pacer or LTS if they are not involved
in or in need of intermodal transportation of Containers or Trailers
within the Eastern States or (b) any entity or holdings acquired or
held by Apollo Management, L.P. or any of its Affiliates ("Apollo
Entity") (other than Pacer, LTS and their Affiliates) which is not
operationally (other than as a customer), managerially or otherwise
related to Pacer or LTS, except through its affiliation with an Apollo
Entity.
1.1.2 "Commencement Date" means January 1, 2000.
1.1.3 "Confidential Information" means the terms and
conditions of this Agreement and information that is proprietary to or
held in confidence by CSXI or Pacer or their respective
Affiliates, including, but not limited to, incentive amounts and
formulas, customer lists and information, pricing formulas and data,
rail rates and other charges, origin and destination information,
traffic volumes and commodities moved, train schedules and/or
performance, cost data, financial information, operating procedures and
business plans and strategies.
1.1.4 "Conrail" means Consolidated Rail Corporation, a
Pennsylvania corporation.
1.1.5 "Conrail Core Network" means those railroad points and
lanes served by Conrail, as of the date hereof, and which will be
competitively served by CSXT after the Split Date.
1.1.6 "Container" means a freight vehicle with devices to
enable ready attachment to a wheeled underframe which has a device for
coupling to a self-powered tractor for movement over the highway.
1.1.7 "CSXI/CSXT Core Network" means those railroad lanes
competitively served by CSXT, as of the date hereof.
1.1.8 "CSXT" means CSX Transportation, Inc., a Virginia
corporation.
1.1.9 "Domestic Service" means rail transportation service
other than International Service.
1.1.10 "Eastern State" means a state specified in Exhibit
1.1.10.
1.1.11 "Existing TPI Customers" means those existing
international shipping customers of LTS set forth in Exhibit 1.1.11.
1.1.12 "IMCs" means intermodal marketing companies engaged in
arranging intermodal transportation for beneficial owners of cargo
transported in Containers and Trailers.
1.1.13 "International Service" means rail transportation
service with respect to a Container that has a prior or subsequent
waterborne movement under a bill of lading with a foreign origin or
destination.
1.1.14 "LTS Movement" means a rail movement of a Container
arranged by or for the benefit of LTS or Existing TPI Customers;
provided, however, that "LTS Movement" shall not include an
international rail movement of a Container arranged by, or for the
benefit of, APL or any Affiliate of APL.
1.1.15 "LTS Transcontinental Volume" means the number of LTS
Movements in 1998 utilizing the Conrail Core Network or via Norfolk
Southern Railway or its Affiliates.
1.1.16 "New Affiliate" means any Affiliate acquired by Pacer
or any of its Affiliates after December 31, 1998.
1.1.17 "New Affiliate Movement" means a rail movement of a
Container or Trailer arranged by or for the benefit of a New Affiliate.
1.1.18 "New Affiliate Local Volume" means the number of New
Affiliate Movements between points in the Eastern States within or
utilizing either the CSXI/CSXT Core Network or the Conrail Core Network
in the year prior to its acquisition by Pacer.
1.1.19 "New Affiliate Transcontinental Volume" means the
number of New Affiliate Movements in Domestic Service from origins or
to destinations west of the Continental Divide utilizing CSXI's
transcontinental transportation service in the year prior to its
acquisition by Pacer.
1.1.20 "Pacer Local Volume" means the number of Pacer
Movements between points in the Eastern States within or utilizing the
CSXI/CSXT Core Network or the Conrail Core Network in calendar year
1998.
1.1.21 "Pacer Local Volume Target" means the percentage of
Pacer Local Volume that Pacer should tender to CSXI during each
calendar year in order to receive incentive payments provided in this
Agreement.
1.1.22 "Pacer Movement" means a rail movement of a Container
or Trailer arranged by or for the benefit of Pacer or any of its
Affiliates, other than LTS.
1.1.23 "Pacer Transcontinental Volume" means the number of
Pacer Movements in Domestic Service from origins or to destinations
west of the Continental Divide utilizing CSXI's transcontinental
transportation service in 1998.
1.1.24 "Pacer Transcontinental Volume Target" means the
percentage of Pacer Transcontinental Volume that Pacer should tender to
CSXI during each calendar year in order to receive the incentive
payments provided in this Agreement.
1.1.25 "Split Date" means the date on which the assets of
Conrail are actually allocated between Norfolk Southern Corporation and
its Affiliates and CSXT under the agreement approved by the Surface
Transportation Board in Finance Docket No. 33388.
1.1.26 "TPI Customer" means an international shipping
enterprise (other than APL and its Affiliates) that has engaged LTS to
arrange transcontinental International Service over the Pacific Ocean
for Containers owned or leased by that international shipping
enterprise.
1.1.27 "Trailer" means a vehicle equipped with a permanent
undercarriage or wheel assembly with a device for coupling to a self-
powered tractor for movement.
1.1.28 "transcontinental" or "transcontinentally" is used to
describe a rail movement (i) from a point outside the Eastern States to
a point inside the Eastern States or (ii) from a point inside the
Eastern States to a point outside the Eastern States.
1.2 Other Terms. Other capitalized terms shall have the meaning
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given them in the text of this Agreement.
1.3 Interpretation. References to "origin and destination pair" or "O/D
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pair" mean a movement one-way from an origin to a destination. "Lane" or "a
lane" refers to rail movements in either direction between two rail service
points. A "movement of the same type and size" means a movement of Containers of
the same type (whether loaded or empty, whether International or Domestic) and
size (whether 20', 40', 45', 48' or 53' or other length).
2. RECITALS. The above recitals are true and correct and are incorporated herein
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by this reference.
3. TERM OF THIS AGREEMENT.
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3.1 Commencement. This Agreement shall become effective on January 1,
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2000.
3.2 Termination. This Agreement shall terminate at 11:59 p.m. on
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December 31, 2014; provided, however, that if the APL/LTS Agreement is
terminated prior to such time, this Agreement shall terminate simultaneously
with the termination of the APL/LTS Agreement.
4. VOLUME TARGETS.
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4.1 Pacer Local Volume Target. Provided that CSXI is in compliance with
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its obligations under Section 5 hereof, during the first calendar year of this
Agreement, Pacer shall tender to CSXI in local Domestic Service an amount equal
to eighty percent (80%) of the Pacer Local Volume. Provided that CSXI is in
compliance with its obligations under Section 5 hereof, in each subsequent year
of this Agreement the amount of the Pacer Local Volume that Pacer shall be
obligated to tender to CSXI in local Domestic Service shall increase by an
amount equal to five percent (5%) of the Pacer Local Volume.
4.2 Pacer Transcontinental Volume Target. Provided that CSXI is in
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compliance with its obligations under Section 5 hereof, during the first
calendar year of this Agreement, Pacer shall tender to CSXI in transcontinental
Domestic Service an amount equal to one-hundred percent (100%) of the Pacer
Transcontinental Volume. Provided that CSXI is in compliance with its
obligations under Section 5 hereof, in each subsequent calendar year of this
Agreement the amount of the Pacer Transcontinental Volume that Pacer shall be
obligated to tender to CSXI in transcontinental Domestic Service shall increase
by an amount equal to five percent (5%) of the Pacer Transcontinental Volume.
4.3 Supplement of Volume Targets for New Affiliate Volumes.
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4.3.1 General. The Pacer Local Volume Target and the Pacer
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Transcontinental Volume Target in this Section 4 shall be supplemented
as set forth in this Section 4.3.
4.3.2 Supplements.
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(a) New Affiliate Local Volume. Provided that CSXI is
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in compliance with its obligations under Section 5 hereof and
subject to Section 4.3.3, the Pacer Local Volume Target shall
be supplemented to include (a) for the calendar year in which
Pacer acquires any New Affiliate, an amount equal to eighty
percent (80%) of the portion of such Affiliate's New Affiliate
Local Volume attributable to the period in the year prior to
its acquisition by Pacer corresponding to the period remaining
in its year of acquisition by Pacer; (b) for the calendar year
following Pacer's acquisition of such New Affiliate, an amount
equal to eighty-five percent (85%) of such Affiliate's New
Affiliate Local Volume and (c) for each subsequent calendar
year of this Agreement, the amount of such Affiliate's New
Affiliate Local Volume that Pacer shall be obligated to tender
to CSXI in local Domestic Service shall increase by an amount
equal to five percent (5%) of such Affiliate's New Affiliate
Local Volume.
(b) New Affiliate Transcontinental Volume. Provided
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that CSXI is in compliance with its obligations under Section
5 hereof and subject to Section 4.3.3, the Pacer
Transcontinental Volume Target shall be supplemented to
include (a) for the calendar year in which Pacer acquires any
New Affiliate, an amount equal to one-hundred percent (100%)
of the portion of such Affiliate's New Affiliate
Transcontinental Volume attributable to the period in the year
prior to its acquisition by Pacer corresponding to the period
remaining in its year of acquisition by Pacer; (b) for the
calendar year following Pacer's acquisition of such New
Affiliate, an amount equal to one-hundred-five percent (105%)
of such Affiliate's New Affiliate Transcontinental Volume and
(c) for each subsequent calendar year of this Agreement, the
amount of such Affiliate's New Affiliate Transcontinental
Volume that Pacer shall be obligated to tender to CSXI in
transcontinental Domestic Service shall increase by an amount
equal to five percent (5%) per year of such Affiliate's New
Affiliate Transcontinental Volume.
4.3.3 Subtraction of New Affiliate's Volume from Pacer's
Volume Targets. Upon the occurrence of any event resulting in any New
Affiliate no longer being an Affiliate of Pacer, any supplements to
Pacer's Volume Targets required to be made pursuant to this Section 4.3
with respect to such New Affiliate shall be eliminated. Nothing in this
Agreement shall be construed to prohibit or restrict the sale, transfer
or other disposition of any New Affiliate by Pacer for any reason and
at any time throughout the term of this Agreement.
4.4 LTS Volume Targets.
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4.4.1 LTS 6-Month Volume Target. During the first six months
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of each calendar year of this Agreement, LTS shall tender to CSXI for
transportation under the APL/LTS Agreement eighty-five percent (85%) of
the LTS Transcontinental Volume attributable to the first six-month
period of 1998 (the "LTS 6-Month Volume Target").
4.4.2 LTS 12-Month Volume Target. During each calendar year of
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this Agreement, LTS shall tender to CSXI for transportation under the
APL/LTS Agreement eighty-five percent (85%) of the LTS Transcontinental
Volume (the "LTS 12-Month Volume Target" and together with the LTS 6-
Month Volume Target, the "LTS Volume Targets").
4.5 Loss of Existing TPI Customers. If at any time during the term of
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this Agreement (a) there is any decrease in volume of any Existing TPI Customer
below the levels included in LTS Transcontinental Volume (whether as a result of
a termination of such customer relationship or otherwise) and (b) LTS does not
obtain additional volumes from TPI Customers with substantially equivalent
volumes who are permitted to move Containers at or below the rates set forth in
the rate exhibits to the APL/LTS Agreement, then immediately following such
occurrence, the net decrease in volume shall be subtracted from the LTS
Transcontinental Volume for all purposes under this Agreement, including without
limitation, any calculations of the LTS Volume Targets pursuant to Section 4
hereof.
4.6 Reports on Pacer's Volume Targets. Within thirty (30) days
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following the end of each calendar year of this Agreement, Pacer shall provide
to CSXI all Container volume data reasonably necessary to verify whether Pacer
has met the Pacer Local Volume Target and the Pacer Transcontinental Volume
Target, and a written certificate of such compliance. If the data indicates that
Pacer has not met the Pacer Local Volume Target or the Pacer Transcontinental
Volume Target, Pacer shall certify the extent thereof.
4.7 Limitation of Remedies. If CSXI meets its obligations under Section
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5 and Pacer and LTS fail to meet their respective volume targets under this
Agreement, CSXI's sole remedy hereunder shall be the non-payment of incentives
otherwise payable pursuant to Section 6 hereof.
4.8 Underlying Agreements. The parties understand and agree that the
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rail movements of Pacer and its Affiliates (excluding LTS) referred to in this
Agreement shall be made in accordance with the provisions of the existing
wholesale agreement between Pacer and CSXI (No. 3837) or one or more successor
or additional transportation agreements, based upon CSXI's customary terms and
conditions for such agreements with IMCs.
4.9 Pacer Transcontinental Volume Offset. Pacer may, in any calendar
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year period during the term of this Agreement, apply tendered volumes of
Containers and/or Trailers in excess of the Pacer Transcontinental Volume Target
under Section 4.2, as supplemented by New Affiliate Transcontinental Volume
pursuant to Section 4.3.2(b), to offset shortages in the volumes of Containers
and/or Trailers tendered for the purposes of the Pacer Local Volume Target under
Section 4.1, as supplemented by New Affiliate Local Volume pursuant to Section
4.3.2(a). If Pacer elects to do so, it shall so indicate in the data to be
provided pursuant to Section 4.6.
5. CSXI'S OBLIGATION TO PROVIDE SERVICE AND COMPARABLE
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AND COMPETITIVE TREATMENT.
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5.1 Pacer Volume Targets. CSXI shall provide Pacer with equipment
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availability, service levels, and price terms that are substantially equivalent
to those which CSXI offers from time to time to its other IMC customers and at
terms competitive with other rail alternatives in the market. Pacer shall
provide CSXI with monthly reports of the reasonable estimate of the volume of
Pacer Movements which were not tendered to or shipped over the CSXI/CSXT rail
network because of CSXI's failure, as determined by Pacer in good faith, to
provide equipment, pricing, service or incentives competitive in the relevant
market for
similar types of movements. Such Pacer Movements so identified shall be reviewed
by CSXI. The parties agree to resolve any disputes that might arise as to the
volume of affected Pacer Movements in accordance with Sections 9.2 and 9.3
hereof. Affected volumes, whether agreed upon by the parties or determined in
accordance with the findings of the arbitrator, shall be deemed tendered to CSXI
for purposes of the determination of whether Pacer has met the Pacer Local
Volume Target and the Pacer Transcontinental Volume Target.
5.2 LTS Volume Targets. Without limiting any of the remedies available
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to LTS under the APL/LTS Agreement, LTS volume commitments suspended and volumes
diverted (as opposed to volumes moved pursuant to the 5% flexibility authorized
in the APL/LTS Agreement) in accordance with the terms of the APL/LTS Agreement
shall be deemed tendered to CSXI for purposes of the determination of whether
LTS has met the LTS Volume Targets.
5.3 Force Majeure.
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5.3.1 CSXI Force Majeure. If a force majeure condition exists
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under the APL/LTS Agreement or exists for an underlying rail carrier
providing service to CSXI's transcontinental transportation service
that adversely affects CSXI's ability to provide transportation service
to Pacer volumes and LTS volumes, as applicable, Pacer volumes and LTS
volumes as to which CSXI was unable to provide transportation service
as a result of the force majeure condition shall be deemed tendered to
CSXI for purposes of the determination of whether Pacer and LTS have
met their respective volume targets under this Agreement.
5.3.2 Pacer Force Majeure. If Pacer or a New Affiliate, as a
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result of a force majeure condition (as defined in the APL/LTS
Agreement and subject to the same commitment therein set forth to work
around the condition where commercially reasonable and to recommence
when the condition is resolved), is unable to tender certain volumes of
Containers and/or Trailers to CSXI for rail transportation services
which would have otherwise been so tendered, those volumes shall be
deemed tendered to CSXI for the purposes of Sections 4.1, 4.2, and/or
4.3.2, as the case may be, subject to a maximum of ten percent (10%) of
the applicable volume target for that year under Sections 4.1, 4.2 or
4.3.2, respectively.
5.3.3 Notification. Pacer shall, promptly after resolution of
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a given force majeure condition, provide CSXI with a report of the
volumes of Containers and/or Trailers it proposes for treatment under
this Section 5.3.
5.4 Independent Incentives. The parties expressly acknowledge that
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Pacer and Pacer's Affiliates are as of the date hereof and, from time to time,
will be parties to other transportation services agreements and incentive
agreements providing, among other things, for the payment of incentives by CSXI
or its Affiliates to Pacer or its Affiliates. Except as hereafter agreed to by
the parties, the parties intend that the incentive payments made by CSXI to
Pacer under this Agreement shall be in addition to, and will not terminate,
cancel, diminish or otherwise affect any of the terms of any prior or future
transportation services or incentive agreements between CSXI or its Affiliates
and Pacer or any of its Affiliates, including but not limited to LTS and such
agreements and incentive payments thereunder shall continue pursuant to their
terms.
6. DETERMINATION OF INCENTIVE PAYMENTS.
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6.1 Incentive Payments based on LTS Transcontinental Traffic.
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6.1.1 Base Calculation. As of the effective date of the
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LTS/APL Agreement, CSXI shall calculate the difference between (a) the
standard linehaul rate under LTS' former agreements with Conrail and
Norfolk Southern Railway for each type and size of Container for LTS
Movements for each O/D Pair, and (b) LTS' linehaul rate on CSXI for
each type and size of Container for LTS Movements for each O/D Pair
under the APL/LTS Agreement (each such calculation, a "Rate
Differential").
6.1.2 Six Month Savings Determination and Incentive Payment.
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Within twenty (20) days following the initial six-month period for each
calendar year of this Agreement, CSXI shall calculate the actual
savings realized by LTS during such six-month period by multiplying (a)
the actual volume of LTS Movements on CSXI during that six-month period
for each type and size of Container for each O/D Pair and (b) the
corresponding Rate Differential (the "6-Month Total Rate Savings").
Provided that LTS has met the LTS 6-Month Volume Target, CSXI shall
within thirty (30) days after the expiration of such six-month period,
pay Pacer three-million dollars ($3,000,000) minus the 6-Month Total
Rate Savings.
6.1.3 Year-End Savings Determination and Incentive Payment.
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Within twenty (20) days following the end for each calendar year of
this Agreement, CSXI shall calculate the actual savings realized by LTS
during such one-year period by multiplying (a) the actual volume of LTS
Movements on CSXI during that one-year period for each type and size of
Container for each O/D Pair and (b) the corresponding Rate Differential
(the "One-Year Total Rate Savings"). Provided that LTS has met the LTS
12-Month Volume Target, CSXI shall within thirty (30) days after the
expiration of such one-year period, pay Pacer six-million dollars
($6,000,000) minus (a) the One-Year Total Rate Savings and (b) any
payments made pursuant to Section 6.1.2. CSXI shall be obligated to
make such payment pursuant to this Section 6.1.3, regardless of whether
LTS has met its volume targets for the prior six-month period.
6.1.4 Initial Accrual Period. The initial accrual period for
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six-month incentive payments made pursuant to this Section 6.1 shall
terminate on June 30, 2000.
6.2 Supplemental Incentive Payments to Pacer.
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6.2.1 Six Month Incentive Payment. Within thirty (30) days
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following the initial six-month period for each calendar year of this
Agreement (or other period as set forth in Section 6.4), CSXI shall pay
Pacer one-million dollars ($1,000,000) minus the amount by which the 6-
Month Total Rate Savings during such six-month period exceeds three-
million dollars ($3,000,000); provided, however, CSXI shall not be
obligated to make any payment pursuant to this Section 6.2.1 unless
Pacer has met the Pacer Local Volume Target and the Pacer
Transcontinental Volume Target and LTS has met the LTS 6-Month Volume
Target, in each case as set forth in Section 4 for such six-month
period.
6.2.2 Twelve Month Incentive Payment. Within thirty (30) days
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following each calendar year of this Agreement, CSXI shall pay Pacer
two-million dollars ($2,000,000) minus (a) the amount by which the One-
Year Total Rate Savings during such one-year period exceeds six-million
dollars ($6,000,000) and (b) any payment made pursuant to Section
6.2.1. CSXI shall not be obligated to make any payment pursuant to this
Section 6.2.2 unless Pacer has met the Pacer Local Volume Target and
the Pacer Transcontinental Volume Target and LTS has met the LTS 12-
Month Volume Target, in each case set forth in Section 4 for such one-
year period. CSXI shall be obligated to make such payment pursuant to
this Section 6.2.2, regardless of whether Pacer or LTS have met their
respective volume targets for the prior six-month period.
6.2.3 Initial Accrual Period. The initial accrual period for
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six-month incentive payments made pursuant to this Section 6.2 shall
terminate on June 30, 2000.
6.3 Commencement Prior to APL/LTS Agreement. If the Commencement Date
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of this Agreement is prior to the commencement of the APL/LTS Agreement, then
for the portion of the relevant "six-month period" or periods or the relevant
"calendar year period" or periods under this Agreement from January 1, 2000
through the commencement of the APL/LTS Agreement LTS shall be deemed to have
met the LTS 6-Month Volume Target under Section 4.4.1 and the LTS 12-Month
Volume Target under Section 4.4.2, as applicable. If the Commencement Date of
this Agreement is prior to the Split Date, then for the
portion of the relevant "six-month period" or periods or the relevant "calendar
year period" or periods under this Agreement from January 1, 2000 through the
Split Date Pacer shall be deemed to have met each of the Pacer Local Volume
Target under Section 4.1 and the Pacer Transcontinental Volume Target under
Section 4.2. Upon the commencement of the APL/LTS Agreement or the occurrence of
the Split Date, as the case may be, and upon expiration of the then current
"six-month period" or "calendar year," as the case may be, this Section 6.3
shall be of no further effect and all future volume targets shall be governed by
the provisions of Section 4 hereof.
6.4 Incentive Limitations.
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6.4.1 If at the end of any twelve-month measurement period it
is determined that the sum of (x) the One-Year Total Rate Savings for
such period and (y) incentive payments actually received by Pacer from
CSXI under Sections 6.1.2, 6.1.3, 6.2.1 and 6.2.2 for such period
exceeds $8,000,000, then Pacer shall refund to CSXI any such excess to
the extent, but only to the extent, of such incentive payments. Nothing
in this Agreement shall be construed to limit, in any manner, the One-
Year Total Rate Savings which may be achieved by LTS under the APL/LTS
Agreement.
6.4.2 Sections 6.1 and 6.2 notwithstanding, if LTS' One-Year
Total Rate Savings exceed $8,000,000 for three consecutive one-year
periods, this Agreement shall terminate and be of no further force or
effect.
7. EFFECT OF AN EVENT OF DEFAULT. For so long as there shall exist and be
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continuing a Pacer Breach or an Event of Default (as defined in the APL/LTS
Agreement) with respect to LTS under the APL/LTS Agreement, the number of
movements made by Pacer or LTS during such period shall not be included in the
calculation of the Pacer Local Volume Target, the Pacer Transcontinental Volume
Target or the LTS Volume Targets. Upon the cure of a Pacer Breach or an Event of
Default with respect to LTS under the APL/LTS Agreement during a given calendar
year period, volumes previously excluded from the calculations of volume targets
during that calendar year pursuant to the immediately preceding sentence shall
be included for purposes of determining whether volume targets have been met.
"Pacer Breach" shall mean that Pacer or its Affiliates are in material breach of
this Agreement and such breach remains uncured for 60 days.
8. AUDIT RIGHTS.
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8.1 CSXI and Pacer's Right to Audit.
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8.1.1 Timing of Audit. Each party shall have the right, at its
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own cost and expense, to cause an independent auditor who shall be
selected from among the "Big Five" accounting firms, which is mutually
acceptable to CSXI and Pacer (the "Auditor"), to audit the other party
from time to time upon thirty (30) days' prior written notice to the
other party, but no more frequently than twice per year; provided,
however, the auditing party may conduct a follow-up audit within six
(6) months of completion of any audit which reveals any material
irregularities or noncompliance regarding the payment of incentives or
the calculation of any of the Pacer Local Volume Target, the Pacer
Transcontinental Volume Target, the LTS Volume Targets, any Rate
Differential, the 6-Month Total Rate Savings or the One-Year Total Rate
Savings. Each party's right to audit shall remain in effect for twelve
(12) months after the termination of this Agreement.
8.1.2 Matters Subject to CSXI's Audit. CSXI shall have the
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right, at its own cost and expense, to cause the Auditor to audit
Pacer's and its Affiliates' books and records to confirm their
compliance with the Pacer Local Volume Target, the Pacer
Transcontinental Volume Target and the LTS Volume Targets, as
appropriate, and the calculation of any incentive payment under Section
6.
8.1.3 Matters Subject to Pacer's Audit. Pacer shall have the
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right, at its own cost and expense, to cause the Auditor to audit
CSXI's books and records to confirm calculations in
connection with any of the Pacer Local Volume Target, the Pacer
Transcontinental Volume Target, the LTS Volume Targets, any Rate
Differential, the 6-Month Total Rate Savings or the One-Year Total Rate
Savings and the calculation of any incentive payments under Section 6.
8.1.4 Conduct of Audit. Any such audit shall be conducted at
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the auditing party's cost and expense, during normal business hours, at
the other party's offices and at times which do not unreasonably
interfere with the other party's business operations. The Auditor shall
protect the Confidential Information of the other party and upon the
other party's request, the Auditor shall execute a confidentiality
agreement in a form reasonably acceptable to the other party.
8.1.5 Maintenance of Books and Records. Each party shall
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maintain all books and records needed to perform an audit for a period
of three (3) years (or such longer period as may be required by law)
from the date of any material event reflected in such books or records
and shall provide the Auditor with reasonable access to such books and
records; provided, however, neither party shall be obligated to
maintain any such books or records for more than twelve (12) months
after the termination of this Agreement.
8.1.6 Expenses. If the Auditor determines that (i) either
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party miscalculated compliance with the Pacer Local Volume Target, the
Pacer Transcontinental Volume Target or the LTS Volume Targets, (ii)
CSXI miscalculated any Rate Differential, the 6-Month Total Rate
Savings or the One-Year Total Rate Savings, or (iii) there was an
underpayment or overpayment of the incentive payments owed to Pacer
under Section 6, the party who benefited from such miscalculation shall
reimburse the other party for such underpaid or overpaid incentives and
if such underpayment or overpayment of incentives equals ten percent
(10%) or more for any six or twelve month period, the party who
benefited from such miscalculation shall reimburse the auditing party
for the reasonable out-of-pocket expense of such audit. The parties
hereby agree that the determinations of the Auditor shall be binding
without recourse to the dispute resolution provisions under Section 9.
9. DISPUTE RESOLUTION
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9.1 Disputes Subject To Procedures. All disputes, whether sounding in
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contract, tort or otherwise, arising out of or relating to this Agreement,
including, but not limited to, the arbitrability of a party's claim or dispute
or the breach of this provision, default under or breach of any provision in
this Agreement and termination of this Agreement shall be resolved pursuant to
the provisions of this Section 9 exclusively.
9.2 Internal Review. The parties agree that each will attempt in good
---------------
faith to resolve through negotiation any dispute, claim or controversy arising
out of or relating to this Agreement. Any party hereto may initiate negotiations
by providing written notice in letter form to the other parties, setting forth
the subject of the dispute and the relief requested. The recipient of such
notice will respond in writing within fifteen (15) days with a statement of its
position on and recommended solution to the dispute. If the dispute is not
resolved by this exchange of correspondence, then representatives of each party
with full settlement authority shall meet, in person or teleconference, at a
mutually agreeable time and place as soon as practicable in order to exchange
relevant information and perspectives, and to attempt to resolve the dispute
within fifteen (15) days of the date of the receipt of initial notice. If the
dispute is not resolved by these negotiations, either party may submit the
dispute to CSXI's Executive Vice President of Marketing and Sales and Pacer's
Chairman and Chief Executive Officer, or such other senior executives as may be
mutually agreed upon by the parties from time to time. The submission shall be
accompanied by the original notice of dispute and response thereto and any
additional evidence and arguments that may be relevant. The designated
executives shall then arrange to meet, in person or by teleconference, at a
mutually agreeable time and location as soon as practicable and shall diligently
attempt to resolve the dispute over the next fifteen (15) days following
submission of the dispute to them. If such executives do not agree upon a
decision within fifteen (15) days after submission of the dispute to them, or
such longer time as they may agree upon, then either party may, by providing a
notice of arbitration to the other party, submit the dispute to arbitration in
accordance with the following provisions.
9.3 Arbitration Procedures. All disputes described in Section 9.1 which
----------------------
are not resolved under Section 9.2 shall be submitted for final resolution
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association then in effect, and the parties hereby agree that the judgment of
the arbitrator shall be binding and consent to the entry of judgment by any
court of competent jurisdiction with respect to the decision of the
arbitrator(s). The provisions of this Agreement shall control if they conflict
with the Commercial Arbitration Rules. The U.S. Arbitration Act, 9 U.S.C.
Sections 1-16, to the exclusion of any provisions of state law inconsistent
therewith or which would produce a different result, shall govern the
arbitrability of all claims. The arbitration shall be before an arbitrator
selected in accordance with the Commercial Arbitration Rules. Any decision of
the arbitrator shall be rendered within thirty (30) days after the completion of
the presentation of evidence and witnesses. The arbitrator shall have the
authority to award costs, such as pre-award interest, post-award interest,
expert fees and attorneys' fees as deemed equitable considering the
circumstances, the outcome of the arbitration and the conduct of the parties,
but shall not have the authority to award indirect, special, consequential or
punitive damages or to issue equitable relief.
9.4 Discovery and Rules. The arbitrator shall permit and facilitate
--------------------
such discovery as he or she shall determine is appropriate under the
circumstances taking into account the needs of the parties, the relevance of the
requested discovery to the matter in controversy, and the desirability of making
discovery expeditious and cost-effective. The rules of arbitration may not
deprive a party of the right to be represented by counsel, to present evidence,
or to cross-examine witnesses presented by another party.
9.5 Allocation of Expenses. Subject to the arbitrator's power to award
-----------------------
costs, the expenses, fees and costs of the arbitrator shall be borne equally
between the parties.
9.6 Location for Arbitration. Any non-telephonic arbitration shall be
-------------------------
held in Wilmington, Delaware or such other mutually acceptable location.
9.7 Judicial Proceeding. The parties agree that the only circumstances
-------------------
in which the parties may initiate judicial proceedings under this Agreement are
to obtain injunctive relief for breach of confidentiality obligations or to
enforce this Section 9. In any judicial proceeding to enforce this Section 9,
the only issues to be determined will be the existence of an agreement to
arbitrate and the failure of a party to comply with such agreement, and those
issues will be determined summarily by the court without a jury.
9.8 Conduct of Operations. Pending resolution of any dispute brought in
---------------------
good faith, each party will continue to perform its obligations under this
Agreement, including, but not limited to, the payment of all amounts due to the
other party that are not in dispute, provided that the other party also
continues to perform its obligations hereunder, subject to the terms and
conditions of this Agreement.
10. CONFIDENTIALITY
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10.1 Confidentiality Obligations. Each party agrees (i) to hold in
---------------------------
confidence any Confidential Information of the other party acquired during the
term of this Agreement, (ii) not to disclose the Confidential Information to any
third parties, (iii) to restrict disclosure to those partners, shareholders,
employees or representatives with a need to know and bind such partners,
shareholders, employees or representatives to those confidentiality
restrictions, and (iv) not to use the Confidential Information for any purpose
except as contemplated by this Agreement; provided, however, if required,
Confidential Information may be disclosed in any offering document or filing
with the United States Securities and Exchange Commission or similar entity with
respect to any offering of securities or ongoing reporting requirements relating
to a party.
10.2 Exclusion of Certain Information. This Section 10 will not
---------------------------------
prohibit or limit either party's use of information (a) previously known to such
party and not subject to any confidentiality restrictions, (b) independently
developed by such party, (c) acquired by such party from a third party which is
not, to such party's knowledge, under an obligation not to disclose such
Confidential Information, or (d) which is or becomes publicly available through
no breach by such party of its confidentiality obligations. Either party may
disclose Confidential Information to the extent required by a governmental
agency, under a court order
or as otherwise required by law, provided that the party subject to the legal
requirements has notified the other party of such governmental or court action
prior to disclosing the Confidential Informatio n.
10.3 Right to Equitable Relief. Each party acknowledges the value of
-------------------------
the Confidential Information to the other party and the inadequacy of money or
damages in the event of breach or threatened breach and agrees that the other
shall be entitled to obtain an injunction against a breach of these
confidentiality obligations from any court of competent jurisdiction immediately
upon request, without being required to post a bond or prove that damages are
inadequate.
11. INDEPENDENT CONTRACTOR. Pacer agrees that CSXI will be an independent
----------------------
contractor and not an agent of it. This Agreement does not grant Pacer authority
to enter into any contracts or obligations on behalf of CSXI or otherwise bind
CSXI, and Pacer shall not hold itself out as having such authority. This
Agreement shall not be construed to grant CSXI authority to enter into any
contracts or obligations on behalf of Pacer or otherwise bind Pacer, and CSXI
shall not hold itself out as having such authority.
12. ASSIGNMENT. Except as provided for herein and except as to an assignment of
----------
the benefits hereunder to an Affiliate of Pacer, Pacer may not assign this
Agreement without the prior written approval of CSXI. CSXI may not assign this
Agreement without the prior written approval of Pacer, except to an Affiliate
(other than Sea-Land Service, Inc. or its successor) of CSXI. For purposes of
this Section 12, a merger, sale of all or substantially all business and assets,
a reorganization, a consolidation or other change in control of Pacer shall not
constitute an assignment of this Agreement so long as such successor-in-interest
or surviving entity retains or succeeds to ownership and control of all or
substantially all of the business and assets of Pacer and is and shall be bound
by the terms of, and shall assume all obligations of such party under, this
Agreement; provided, however, the prior written approval of CSXI shall be
required if the successor-in-interest or surviving entity is a railroad or an
Affiliate thereof; provided, further, however, that if CSXI withholds such
approval, Pacer may elect to proceed with such transaction with a railroad or an
Affiliate thereof, and upon consummation of such transaction this Agreement
shall terminate. To the extent not prohibited hereunder, the covenants, terms,
provisions and conditions of this Agreement shall apply to, bind and inure to
the benefit of the respective successors and assigns of Pacer and CSXI.
13. GENERAL
-------
13.1 Additional Documents. Subject to the terms and conditions of this
---------------------
Agreement, each party will use its reasonable efforts to do, or cause to be
done, all actions and things necessary or advisable to consummate the
transactions contemplated by this Agreement.
13.2 Modification. This Agreement may not be modified, changed or
-------------
altered except by written agreement signed by authorized representatives of each
of Pacer and CSXI.
13.3 Waiver of Compliance. The failure by any party hereto to comply
---------------------
with any obligation, covenant, agreement or condition contained herein may be
expressly waived in writing by the party or parties hereto adversely affected by
such failure, but such waiver or failure to insist upon strict compliance shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
13.4 Severability. The provisions of this Agreement shall be deemed
-------------
severable and the invalidity or unenforceability of any such provisions shall
not affect the validity or enforceability of the other provisions hereof.
13.5 Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflicting provision or rule (whether of the
State of Delaware, or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Delaware to be applied. In furtherance of
the foregoing, the internal law of the State of Delaware will control the
interpretation and construction of this Agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply. Any legal action or proceeding
with respect to this Agreement or any
related document shall be brought exclusively in the courts of the State of
Delaware or of the United States District Court for the District of Delaware
and, by execution and delivery of this Agreement, each party hereto and hereby
irrevocably accepts for itself or himself and in respect of its or his property
and assets, generally and unconditionally the jurisdiction of the aforesaid
courts.
13.6 Survival of Representations and Warranties. The provisions of
-------------------------------------------
Sections 8, 9, 10, 13.5 and this 13.6 and any other provision that by its terms
or meaning is intended to survive and shall survive any termination of this
Agreement.
13.7 Headings. The headings in this Agreement are for convenience of
---------
reference only and shall not limit or otherwise affect the meanings hereof.
13.8 Plural; Singular Usage. All terms used in the plural shall include
-----------------------
the singular and the singular shall include the plural.
13.9 Benefit of Parties. Except as otherwise provided in this
-------------------
Agreement, no person or entity other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of this
Agreement.
13.10 Joint Preparation. This Agreement is to be deemed to have been
------------------
prepared jointly by the parties hereto, and any uncertainty or ambiguity
existing herein, if any, shall not be interpreted against any party, but shall
be interpreted according to the application of the rules of interpretation of
agreements that have been negotiated at arm's-length.
13.11 Cumulative Remedies. All rights and remedies conferred under this
--------------------
Agreement or by any other instrument or law shall be cumulative and may be
exercised singularly or concurrently.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective authorized officers the day and year first
written above.
CSX INTERMODAL, INC. PACER INTERNATIONAL, INC.
By: /s/ Lester M. Passa By: /s/ Donald C. Orris
Name: Lester M. Passa Name:
Title: President Title:
EXHIBIT 1.1.10
EASTERN STATES
Alabama
Connecticut
Delaware
Florida
Georgia
Illinois
Indiana
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Missouri
New Hampshire
New
Jersey
New York
North CarolinaOhio
Pennsylvania
Rhode Island
South Carolina
Tennessee
Vermont
Virginia
West Virginia
EXHIBIT 1.1.11
EXISTING TPI CUSTOMERS
Australia New Zealand Direct Lines
Bermuda Container Line
Centennial Express Corp.
Farrell Lines
Fleet Shipping Lines
Hapag Lloyd
Hub City HLX
Matson Navigation
P&O Container Lines
Transamerica Steamship
Westwood Shipping Lines