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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-96233
PROSPECTUS
- -------------
NORTH AMERICAN VAN LINES, INC.
OFFER TO EXCHANGE $150,000,000 OUTSTANDING
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
FOR $150,000,000 REGISTERED
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
THE NEW NOTES:
- The terms of the new notes are identical to the terms of the old notes
except that the new notes are registered under the Securities Act of 1933
and will not contain restrictions on transfer or provisions relating to
additional interest and will contain different administrative terms.
INVESTING IN THE NEW NOTES INVOLVES RISKS. YOU SHOULD CAREFULLY REVIEW THE
RISK FACTORS BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
THE EXCHANGE OFFER:
- Our offer to exchange old notes for new notes will be open until
5:00 p.m., New York City time, on July 24, 2002, unless we extend the
offer.
- No public market currently exists for the notes.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is June 25, 2002
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WHERE YOU CAN FIND MORE INFORMATION
In connection with the exchange offer, we have filed with the Securities and
Exchange Commission, or the SEC, a registration statement on Form S-4 under the
Securities Act of 1933 relating to the new notes to be issued in the exchange
offer. As permitted by SEC rules, this prospectus omits information included in
the registration statement. For a more complete understanding of this exchange
offer, you should refer to the registration statement, including its exhibits.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete and, in each instance,
if the contract or document is filed as an exhibit, we refer you to the copy of
the contract or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by that reference.
The indentures pursuant to which the notes are issued require us to
distribute to the holders of the notes annual reports containing our financial
statements audited by our independent public accountants and quarterly reports
containing unaudited condensed consolidated financial statements for the first
three quarters of each fiscal year. Following completion of the exchange offer,
we will file annual, quarterly and current reports and other information with
the SEC. The public may read and copy any reports or other information that we
file with the SEC at the SEC's public reference room, Room 1024 at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's regional
offices located at 233 Broadway, New York, New York 10279, and Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. The public may obtain information
on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. These documents are also available to the public at the web site
maintained by the SEC at http://www.sec.gov. You may also obtain a copy of the
exchange offer registration statement at no cost by writing or telephoning us at
the following address:
North American Van Lines, Inc.
5001 U.S. Highway 30 West
P.O. Box 988
Ft. Wayne, Indiana 46801-0988
Attention: Ralph A. Ford
Telephone: (260) 429-2511
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST DOCUMENTS FROM US NO
LATER THAN JULY 19, 2002, WHICH IS FIVE DAYS BEFORE THE EXPIRATION DATE OF THE
EXCHANGE OFFER ON JULY 24, 2002.
TABLE OF CONTENTS
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<Caption>
PAGE
--------
Certain References.......................................... iii
Industry Data............................................... iii
Presentation of Financial Information....................... iii
Summary..................................................... 1
Risk Factors................................................ 7
The Exchange Offer.......................................... 16
Use of Proceeds............................................. 24
Capitalization.............................................. 25
Selected Historical Financial Data.......................... 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 31
Business.................................................... 52
Management.................................................. 61
Ownership of Capital Stock.................................. 73
Certain Relationships and Related Party Transactions........ 75
Description of Other Indebtedness........................... 79
Description of Notes........................................ 82
Certain United States Federal Tax Considerations............ 139
Plan of Distribution........................................ 145
Legal Matters............................................... 145
Experts..................................................... 146
Index to Financial Statements............................... F-1
</Table>
ii
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CERTAIN REFERENCES
When we refer to "North American Van Lines" or "NAVL" we are referring to
North American Van Lines, Inc., the issuer of the notes, together with its
subsidiaries and their predecessors, except where the context otherwise
requires. When we refer to "Allied" or to "NFC Moving Services Group," we are
referring to the Allied and Pickfords businesses prior to the Allied acquisition
described in the summary section of this prospectus under the heading "The
Allied Acquisition" or, after that acquisition, to our operations carried out
under the Allied and Pickfords brand names, as the context requires. When we
refer to "SIRVA," we are referring to our parent, SIRVA, Inc., formerly known as
Allied Worldwide, Inc.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. IF YOU ARE GIVEN ANY INFORMATION OR
REPRESENTATION ABOUT THESE MATTERS THAT IS NOT DISCUSSED, YOU MUST NOT RELY ON
THAT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT
PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS
PROSPECTUS OR THE NOTES OFFERED BY THIS PROSPECTUS DOES NOT, UNDER ANY
CIRCUMSTANCES, MEAN THAT THERE HAS NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE
DATE OF THIS PROSPECTUS. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS
PROSPECTUS IS CORRECT AFTER THIS DATE.
INDUSTRY DATA
Industry data used throughout this prospectus are derived from either
(1) research conducted by us based upon data collected by the Department of
Transportation and other unaffiliated third-party sources which we believe to be
reliable, or (2) reports and other information published by the American Moving
and Storage Association, an industry research company and publisher, and the
American Trucking Association, a national trucking organization.
Although we believe our third-party sources to be reliable, the accuracy and
completeness of the information provided to us are not guaranteed. Neither such
data nor the information included in the industry publications we reference,
including market and competitive position data, have been independently verified
by us. Although such market and competitive position data are inherently
imprecise, based on its understanding of the markets in which we compete,
management believes that such data are generally indicative of our relative
market share and competitive position.
PRESENTATION OF FINANCIAL INFORMATION
In this prospectus, except where otherwise indicated, references to
- "U.S. Dollars," "Dollars" or "$" are to the currency of the United States,
and
- "Pound sterling," "Pounds," or "L" are to the currency of the United
Kingdom.
Except as otherwise stated, in this prospectus, translations of non-dollar
currencies to dollars have been calculated, for income statement purposes, on
the basis of average exchange rates over the related periods and, for balance
sheet purposes, the rate in effect on the date of the relevant balance sheet.
These translations should not be construed as representations that the
non-dollar currency amounts actually represent such dollar amounts or could be
converted into dollars at the rates indicated or at any other rates.
This prospectus contains pound-denominated financial statements of Allied.
Solely for your convenience, the following table reflects the exchange rates for
the period pertaining to such statements.
iii
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We do not represent that the pound amounts shown in this prospectus would have
been converted into Dollars at the quoted exchange rates.
<Table>
<Caption>
FISCAL YEAR ENDED
SEPTEMBER 30, 1999
-------------------
Exchange rate at the end of period.......................... 1.65
Average exchange rate during period......................... 1.63
High exchange rate during period............................ 1.72
Low exchange rate during period............................. 1.55
</Table>
iv
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SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY, THE SECURITIES BEING SOLD AND OUR
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS.
OUR BUSINESS
We are a leading global relocation and moving services company and also the
largest logistics services provider among all U.S. van lines. We are a global
network manager of agents, owner/operators and company-owned branches with
locations in 21 countries. Our relocation businesses provide high-quality
packing, warehousing, hauling and delivery for both domestic and international
residential moves. We also provide a broad portfolio of services to commercial
customers, including office and industrial relocations and records management.
Our logistics services segment provides customized solutions to facilitate the
movement of high-value products that require specialized transport and handling
such as electronics, telecommunications and medical equipment and fine art. Our
diversified customer base includes many leading Fortune 500 and FTSE-100
companies, private transferees and the government and military of the United
States and other countries.
THE ALLIED ACQUISITION
On November 19, 1999, we acquired the Allied and Pickfords moving van
businesses from Exel plc, formerly known as NFC plc. In the acquisition, we
acquired capital stock of various Exel subsidiaries located throughout the
world, and the moving van-related assets of Exel's Canadian operating
subsidiary. Concurrently with the closing of the acquisition, and as part of the
financing for the transaction, North American Van Lines issued and sold the old
notes, and borrowed an aggregate of $325.0 million in term loan borrowings and
$65.0 million in revolving credit borrowings under a senior secured credit
facility. In addition, as part of that financing, SIRVA, Inc. (formerly known as
Allied Worldwide, Inc.), our parent, incurred $35.0 million initial accreted
value of unsecured senior discount term loan borrowings (such amount had
accreted to $50.1 million as of March 31, 2002). As part of that financing,
SIRVA borrowed $40.0 million in term loan borrowings under an interim loan
facility. On December 1, 1999, Clayton, Dubilier & Rice Fund V Limited
Partnership, our controlling shareholder, and a subsidiary of Exel subscribed
for and purchased additional common stock of SIRVA for $40.0 million in cash.
The proceeds from this stock purchase were used to repay this $40.0 million
interim loan.
CLAYTON, DUBILIER & RICE INVESTMENT FUNDS
The controlling shareholder of our parent, SIRVA, Inc., is Clayton,
Dubilier & Rice Fund V Limited Partnership. Clayton, Dubilier & Rice Fund V
Limited Partnership, a Cayman Islands exempted limited partnership formed in
March 1995, is a private investment fund that receives management services from
Clayton, Dubilier & Rice, Inc., a Delaware corporation. As of May 20, 2002,
Clayton Dubilier & Rice Fund VI Limited Partnership, held approximately 24.0% of
the capital stock of our parent, SIRVA, Inc. Clayton Dubilier & Rice Fund VI
Limited Partnership, a Cayman Islands exempted limited partnership formed in
August 1998, is an affiliate of our controlling shareholder, Clayton,
Dubilier & Rice Fund V Limited Partnership. It is a private investment fund that
receives management services from Clayton, Dubilier & Rice, Inc. See "Certain
Relationships and Related Party Transactions".
* * *
North American Van Lines' principal executive offices are located at
5001 U.S. Highway 30 West, P.O. Box 988, Ft. Wayne, Indiana 46801-0988. Its
phone number is (260) 429-2511.
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SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
On November 19, 1999, we completed a private offering of $150,000,000
principal amount of 13 3/8% senior subordinated notes. In this prospectus, we
refer to (1) the notes sold in that original offering as the old notes, (2) the
notes offered hereby in exchange for the old notes as the new notes, and
(3) the old notes and the new notes together as notes.
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The Exchange Offer........................ You may exchange old notes for new notes.
Resale of New Notes....................... We believe the new notes that will be issued in this
exchange offer may be resold by most investors without
compliance with the registration and prospectus delivery
provisions of the Securities Act, subject to certain
conditions. You should read the discussion under the
heading "The Exchange Offer" for further information
regarding the exchange offer and resale of the new
notes.
Registration Rights Agreement............. We have undertaken this exchange offer pursuant to the
terms of a registration rights agreement entered into
with the initial purchasers of the old notes. See "The
Exchange Offer" and "Description of Notes--Registration
Rights."
Consequence of Failure to Exchange Old
Notes................................... You will continue to hold old notes that remain subject
to their existing transfer restrictions if:
- you do not tender your old notes or
- you tender your old notes and they are not accepted
for exchange.
With some limited exceptions, we will have no obligation
to register the old notes after we consummate the
exchange offer. See "The Exchange Offer--Terms of the
Exchange Offer" and "--Consequences of Failure to
Exchange."
Expiration Date........................... The exchange offer will expire at 5:00 p.m., New York
City time, on July 24, 2002 (the "Expiration Date"),
unless we extend it, in which case "Expiration Date"
means the latest date and time to which the exchange
offer is extended.
Interest on the New Notes................. The new notes will accrue interest from the most recent
date to which interest has been paid or provided for on
the old notes. Pursuant to the Registration Rights
Agreement, the new notes will accrue interest at a rate
of 13 7/8% per annum to the day before the consummation
of the Exchange Offer. From the date of consummation of
the Exchange Offer, the interest rate will be 13 3/8%
per annum. No additional interest will be paid on old
notes tendered and accepted for exchange.
Condition to the Exchange Offer........... The exchange offer is subject to several customary
conditions, which we may waive. See "The Exchange
Offer--Conditions."
</Table>
2
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<Table>
Procedures for Tendering Old Notes........ If you wish to accept the exchange offer, you must
submit required documentation and effect a tender of old
notes pursuant to the procedures for book-entry transfer
(or other applicable procedures) all in accordance with
the instructions described in this prospectus and in the
relevant letter of transmittal. See "The Exchange
Offer--Procedures for Tendering," "--Book-Entry
Transfer," and "--Guaranteed Delivery Procedures." Other
procedures may apply with respect to book-entry
transfers. See "The Exchange Offer--Exchanging
Book-Entry Notes."
Guaranteed Delivery Procedures............ If you wish to tender your old notes, but cannot
properly do so prior to the expiration date, you may
tender your old notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights......................... Tenders of old notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the expiration
date. To withdraw a tender of old notes, a written or
facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth
in "The Exchange Offer--Exchange Agent" prior to
5:00 p.m., New York City time, on the expiration date.
Acceptance of Old Notes and Delivery of
New Notes............................... Except in some circumstances, any and all old notes that
are validly tendered in the exchange offer prior to
5:00 p.m., New York City time, on the expiration date
will be accepted for exchange. The new notes issued
pursuant to the exchange offer will be delivered as soon
as practicable following the expiration date. See "The
Exchange Offer--Terms of the Exchange Offer."
Certain U.S. Tax Considerations........... We believe that the exchange of the old notes for new
notes should not constitute a taxable exchange for
U.S. federal income tax purposes. See "Certain United
States Federal Tax Considerations."
Exchange Agent............................ State Street Bank and Trust Company is serving as
exchange agent.
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3
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SUMMARY OF THE TERMS OF THE NEW NOTES
The terms of the new notes are identical to the terms of the old notes
EXCEPT that the new notes:
- are registered under the Securities Act, and therefore will not contain
restrictions on transfer,
- will not contain provisions relating to additional interest, and
- will contain terms of an administrative nature that differ from those of
the old notes.
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Maturity.................................. December 1, 2009.
Interest.................................. Interest is payable in cash on June 1 and December 1 of
each year.
Ranking................................... The notes are our senior subordinated debt. Accordingly,
they will rank:
- behind all of our existing and future senior debt;
- equally with all our future subordinated, unsecured
debt that does not expressly provide that it is
subordinated to the notes;
- ahead of any of our future debt that expressly
provides that it is subordinated to the notes; and
- behind all of the liabilities of our existing and
future foreign subsidiaries, and our domestic
subsidiaries that do not guarantee our payment of our
bank indebtedness.
As of March 31, 2002, we had approximately
$362.6 million of senior debt for borrowed money
outstanding. In addition, our foreign subsidiaries and
our domestic subsidiaries that do not guarantee our
payment of our bank indebtedness had $128.6 million of
balance sheet liabilities.
Guarantees................................ The notes will be guaranteed by our domestic
subsidiaries that guarantee our payment of our bank
indebtedness.
Optional Redemption....................... On or after December 1, 2004, we may redeem some or all
of the notes at any time at the redemption prices
described in the "Description of Notes--Optional
Redemption."
Prior to December 1, 2002, we may redeem up to 35% of
the notes with proceeds from certain equity offerings at
the redemption prices described in the section
"Description of Notes--Optional Redemption."
Mandatory Offer to Repurchase............. If we sell specified assets or experience specific kinds
of change of control, we must offer to repurchase the
notes at the prices described in "Description of
Notes--Change of Control."
Basic Covenants of Indenture.............. The indenture under which the notes are issued contains
covenants that will, among other things, restrict our
ability to:
- borrow money;
- pay dividends on stock or repurchase stock;
- make investments;
- use assets as security in other transactions; and
- sell certain assets or merge with or into other
companies.
See "Description of Notes--Certain Covenants."
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RISK FACTORS
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION
OF SOME OF THE RISKS RELATING TO US, OUR BUSINESS, AND AN INVESTMENT IN THE
NOTES.
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SUMMARY HISTORICAL FINANCIAL DATA
We derived our selected historical financial data for the years 1997 and
1999 through 2001 and for the three month period ended March 28, 1998 and for
the nine month period ended December 26, 1998 from our audited financial
statements or those of our predecessor for the periods then ended. Our selected
historical financial data for the periods presented ending after November 19,
1999 (the date of completion of the Allied Acquisition) includes financial data
of Allied. Our selected historical financial data as of and for the three months
ended March 31, 2002 and 2001, respectively, are derived from our unaudited
interim financial statements. The unaudited interim financial statements reflect
all adjustments which, in the opinion of management, are necessary for a fair
statement of the financial condition and results of operations as of and for the
periods presented. Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the full year. The
presentation of selected historical financial data is only a summary and you
should read it together with our historical financial statements and related
notes.
<Table>
<Caption>
ANNUAL DATA
------------------------------------------------------------------------------------------
PREDECESSOR(1) NAVL
----------------------------- ----------------------------------------------------------
NINE MONTH
THREE MONTH PERIOD FROM
PERIOD FROM MARCH 29,
DECEMBER 28, 1998
1997 (INCEPTION)
YEAR ENDED THROUGH THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 27, MARCH 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1999(2) 2000(2)(3) 2001(2)(3)
------------- ------------- ------------- ------------ ------------ ------------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $ 941.5 $ 207.3 $ 759.2 $1,159.8 $2,378.7 $2,249.3
Restructuring and other
unusual charges(4).... (5.5) 4.6 -- 9.1 4.9 4.9
Income/(loss) from
operations............ 31.2 (1.3) 11.5 (1.1) 49.8 53.3
Net income (loss)....... 22.3 (0.7) (1.2) (19.9) (17.1) (10.9)
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents........... $ 2.9 $ 9.2 $ 2.1 $ 25.2 $ 43.5 $ 32.1
Working capital......... 62.0 63.2 31.4 32.7 13.7 (28.2)
Property and equipment,
net................... 57.8 56.4 73.6 165.9 158.7 165.4
Total assets............ 302.3 284.3 392.1 1,162.1 1,216.6 1,095.8
Total debt(5)........... 0.7 0.7 168.6 554.8 562.6 525.0
Stockholder's equity.... 108.1 101.0 63.7 167.7 145.1 121.8
OTHER DATA:
Net cash provided by
(used for) operating
activities............ $ 28.9 $ 10.3 $ (1.6) $ 11.6 $ 52.8 $ 111.3
Capital expenditures.... 10.6 1.4 5.7 12.7 55.4 48.3
Depreciation and
amortization(6)....... 12.5 2.9 22.5 31.2 53.9 48.7
Ratio of earnings to
fixed charges(7)...... 7.61 0.01 1.74 0.96 1.63 1.66
EBITDA, as defined(8)... 38.2 6.2 34.0 43.4 130.2 125.0
<Caption>
THREE MONTH DATA
---------------------------
(UNAUDITED)
---------------------------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2001 2002
------------ ------------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $ 510.4 $ 429.7
Restructuring and other
unusual charges(4).... 0.2 (0.7)
Income/(loss) from
operations............ (4.4) 6.2
Net income (loss)....... 4.9 (3.3)
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents........... $ 37.2 $ 25.6
Working capital......... 20.8 (42.4)
Property and equipment,
net................... 153.2 165.1
Total assets............ 1,153.3 1,042.3
Total debt(5)........... 558.6 513.4
Stockholder's equity.... 139.3 118.4
OTHER DATA:
Net cash provided by
(used for) operating
activities............ $ 5.3 $ 16.1
Capital expenditures.... 9.8 8.6
Depreciation and
amortization(6)....... 12.0 8.6
Ratio of earnings to
fixed charges(7)...... 0.78 1.36
EBITDA, as defined(8)... 12.8 16.0
</Table>
- ------------------------------
(1) See note 1 to Selected Historical Financial Data appearing elsewhere in this
prospectus.
(2) See note 2 to Selected Historical Financial Data appearing elsewhere in this
prospectus.
(3) See note 3 to Selected Historical Financial Data appearing elsewhere in this
prospectus.
(4) See note 4 to Selected Historical Financial Data appearing elsewhere in this
prospectus.
(5) See note 8 to Selected Historical Financial Data appearing elsewhere in this
prospectus.
(6) See note 10 to Selected Historical Financial Data appearing elsewhere in
this prospectus.
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(7) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income from continuing operations plus fixed charges less
capitalized interest. Fixed charges consist of (i) interest whether expensed
or capitalized, (ii) the amortization of deferred debt issuance costs and
(iii) an allocation of one-third of the rental expense from operating
leases, which management considers to be a reasonable approximation of the
interest factor of operating lease payments. For the three months ended
March 31, 2001, the year ended December 25, 1999 and the three month period
ended March 28, 1998, earnings were insufficient to cover fixed charges by
approximately $4.5 million, $1.1 million and $1.3 million, respectively.
(8) EBITDA for the historical periods presented is generally calculated in
accordance with the definition of that term given in the senior credit
agreement governing our senior credit facility (including certain allowable
adjustments) and includes Allied's results since November 19, 1999, the date
of completion of the Allied Acquisition. EBITDA is determined by combining
income (loss) from operations, restructuring and other unusual charges,
depreciation and amortization, non-operating income (loss) and allowable
EBITDA adjustments. See note 12 to Selected Historical Financial Data
appearing elsewhere in this prospectus.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations as determined by generally accepted
accounting principles, and our calculation thereof may not be comparable to
that reported by other companies. We believe that it is widely accepted that
EBITDA provides useful information regarding a company's ability to service
and/or incur indebtedness. EBITDA does not take into account a company's
working capital requirements, debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary use.
6
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RISK FACTORS
YOU SHOULD READ AND CONSIDER CAREFULLY EACH OF THE FOLLOWING FACTORS, AS
WELL AS THE OTHER INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS, BEFORE MAKING A DECISION TO INVEST IN THE NOTES.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS OR ABILITY TO PAY PRINCIPAL OR INTEREST ON THE
NOTES COULD BE MATERIALLY ADVERSELY AFFECTED. IN THAT EVENT, YOU MAY LOSE ALL OR
PART OF YOUR INVESTMENT.
RISKS RELATING TO THE NOTES
IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOU WILL CONTINUE TO HOLD
UNREGISTERED OLD NOTES AND YOUR ABILITY TO TRANSFER OLD NOTES WILL BE ADVERSELY
AFFECTED.
We will only issue new notes in exchange for old notes that are timely and
properly tendered. Therefore, you should allow sufficient time to ensure timely
delivery of the old notes and you should carefully follow the instructions on
how to tender your old notes. Neither we nor the exchange agent are required to
tell you of any defects or irregularities with respect to your tender of the old
notes. If you do not exchange your old notes for new notes pursuant to the
exchange offer, the existing transfer restrictions will continue to apply to the
old notes you hold. In general, the old notes may not be offered or sold, unless
registered under the Securities Act, or exempt from registration under the
Securities Act and applicable state securities laws. We do not anticipate that
we will register old notes under the Securities Act.
After the exchange offer is consummated, if you continue to hold any old
notes, you may have trouble selling them because the liquidity of the market for
such notes may be diminished as there will likely be fewer old notes
outstanding. In addition, if a large number of old notes are not tendered or are
tendered improperly, the limited amount of new notes that would be issued and
outstanding after we consummate the exchange offer could lower the market price
of such new notes.
OUR SUBSTANTIAL INDEBTEDNESS AND OUR ABILITY TO INCUR MORE INDEBTEDNESS COULD
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have significant indebtedness. On March 31, 2002 we had total
indebtedness, consisting of indebtedness for borrowed money and capital leases
and excluding letters of credit, of approximately $513.4 million (of which
$150.0 million consisted of the notes and the balance consisted of borrowings of
$341.2 million under our senior credit facility and other debt of $22.2 million
(see "Capitalization")) and stockholders' equity of approximately
$118.4 million. Our ratio of earnings to fixed charges for the three months
ended March 31, 2002 is 1.36 to 1. The indenture pursuant to which the notes are
issued, the agreements governing SIRVA's $35.0 million (such amount had accreted
to $50.1 million as of March 31, 2002) of senior discount debt and the
agreements governing the senior credit facility limit, but do not prohibit, our
incurrence of additional indebtedness. In connection with the purchase of the
relocation services business of Cooperative Resource Services, Ltd. on May 3,
2002, we incurred an additional $50.0 million of senior indebtedness. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Subsequent Events." A substantial level of debt may make it more
difficult for us to repay you.
Our indebtedness will have important consequences to you. For example, it
could:
- make it more difficult for us to make payments on the notes;
- limit our ability to borrow additional money for working capital, capital
expenditures, debt service requirements or other purposes;
- require us to use a substantial portion of our future cash flow from
operations to pay principal and interest on our indebtedness and other
obligations, which would reduce the availability of this cash
7
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flow to fund working capital, capital expenditures, debt service
requirements or other general corporate expenditures;
- limit our flexibility in planning for, or reacting to changes in, our
business and restrict our ability to take advantage of future business
opportunities;
- place us at a competitive disadvantage to those competitors with less
indebtedness; and
- limit our ability to react to changing market conditions, changes in our
industry and economic downturns.
WE MAY NOT HAVE ENOUGH CASH AVAILABLE TO SERVICE OUR INDEBTEDNESS.
Our ability to pay interest on the notes and meet our other debt service
obligations will depend on our future performance, which in turn depends on
successful implementation of our strategy and on financial, competitive,
regulatory, technical and other factors, many of which are beyond our control.
If we cannot generate sufficient cash flow from operations or meet our debt
service requirements, we may be required to refinance our indebtedness,
including the notes. Our ability to obtain such financing will depend on our
financial condition at the time, the restrictions in the agreements governing
our indebtedness and other factors, including general market and economic
conditions. If such refinancing were not possible, we could be forced to dispose
of assets at unfavorable prices. In addition, we could default on our debt
obligations, including our obligations to make payments on the notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Liquidity and Capital Resources."
OUR DEBT AGREEMENTS IMPOSE OPERATING AND FINANCIAL RESTRICTIONS ON US THAT MAY
PREVENT US FROM CAPITALIZING ON BUSINESS OPPORTUNITIES.
The indenture pursuant to which the notes are issued, the agreements
governing SIRVA's $35.0 million (such amount had accreted to $50.1 million as of
March 31, 2002) of senior discount debt and the agreements governing the senior
credit facility impose significant operating and financial restrictions on us.
The terms of any other financings we may obtain may do so as well. These
restrictions may substantially limit or prohibit us from taking various actions,
including incurring additional debt, making investments, paying dividends to our
shareholders, creating liens, selling assets, engaging in mergers and
consolidations, repurchasing or redeeming capital stock and capitalizing on
business opportunities.
IF WE DO NOT COMPLY WITH THE SUBSTANTIAL RESTRICTIONS IN ALL OF OUR DEBT
ARRANGEMENTS, WE MAY DEFAULT UNDER THESE ARRANGEMENTS, INCLUDING THE NOTES.
We are subject to substantial operating and financial restrictions in
connection with several debt arrangements, including the indenture, the
agreements governing SIRVA's $35.0 million (such amount had accreted to
$50.1 million as of March 31, 2002) of senior discount debt and our senior
credit facility, and the respective agreements governing these arrangements
interact with each other in complex ways.
Failure to comply with the covenants and restrictions in the indenture or
other financing agreements could trigger defaults under such agreements even if
we are able to make payments on our debt. These defaults could result in a
default on the notes and could delay or preclude payment of principal of or
interest on the notes.
THE NOTES WILL BE SUBORDINATED TO OUR SENIOR DEBT, INCLUDING A SENIOR CREDIT
FACILITY.
The notes will be subordinated in right of payment to all of North American
Van Lines' current and future senior indebtedness. North American Van Lines has
senior indebtedness, including a senior credit facility, and may incur
additional senior indebtedness in the future. If we default on our senior
indebtedness or, in the event of bankruptcy, liquidation or reorganization, the
holders of our senior debt will be entitled to be paid in full in cash before
any payment may be made with respect to the notes. Also,
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in the event of bankruptcy, liquidation or reorganization, holders of the notes
will participate ratably with all holders of our subordinated indebtedness that
is deemed to be of the same class as the notes, and potentially with all our
other general creditors, in distributions of our remaining assets. In these
events, we cannot assure you that there would be sufficient assets to pay you in
full or at all. See "Description of Notes--Ranking."
As of March 31, 2002, we had senior indebtedness for borrowed money and
capital leases, including borrowings under our senior credit facility, of
approximately $362.6 million, and approximately $77.5 million would have been
available for additional borrowing under our senior credit facility. In
connection with the purchase of the relocation services business of Cooperative
Resource Services, Ltd. on May 3, 2002, we borrowed an additional $50.0 million
under our senior credit facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Subsequent Events."
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO OBLIGATIONS OF OUR FOREIGN
SUBSIDIARIES AND ANY DOMESTIC SUBSIDIARY THAT DOES NOT GUARANTEE THE NOTES.
North American Van Lines conducts a substantial portion of its business
through direct or indirect subsidiaries. Only those domestic subsidiaries that
guarantee its payment of its bank indebtedness will guarantee payment of the
notes. Creditors of North American Van Lines' other subsidiaries, including
holders of indebtedness and trade creditors, would generally be entitled to
payment of their claims from the assets of the affected subsidiaries before any
funds were made available for distribution to North American Van Lines. The
indenture permits the incurrence of additional indebtedness by North American
Van Lines and its subsidiaries and will permit investments by North American Van
Lines in its subsidiaries. In the event of a bankruptcy, liquidation or
reorganization of a subsidiary that does not guarantee the notes, holders of any
such subsidiary's indebtedness will have a claim to the assets of the subsidiary
that is prior to North American Van Lines' interest in those assets.
As of March 31, 2002, those North American Van Lines subsidiaries that do
not guarantee the notes had $128.6 million of indebtedness for borrowed money,
trade payables and other balance sheet liabilities. If any subsidiary
indebtedness were to be accelerated, we cannot assure you that the assets of
such subsidiary would be sufficient to pay that indebtedness or that the assets
of North American Van Lines and its subsidiaries that then guarantee the notes
would be sufficient to repay in full North American Van Lines' indebtedness,
including the notes.
OUR ACCESS TO THE CASH FLOW OF OUR SUBSIDIARIES IS RESTRICTED.
Although a substantial portion of North American Van Lines' business is
conducted through its subsidiaries, only those domestic subsidiaries that
guarantee its payment of its bank indebtedness will guarantee the notes. None of
our subsidiaries will have any other obligation, contingent or otherwise, to
make any funds available to us for payment of the notes. Accordingly, our
ability to pay the notes is dependent upon the earnings of these subsidiaries
and the distribution of funds from these subsidiaries to North American Van
Lines.
These subsidiaries are permitted under the indenture to incur substantial
additional indebtedness that may severely restrict or prohibit the making of
distributions, the payment of dividends and the making of loans by such
subsidiaries to North American Van Lines. Applicable law of the jurisdictions in
which these subsidiaries are organized or contractual or other obligations to
which they are subject may limit their ability to pay dividends or make or repay
on intercompany loans, including any that may be made with the proceeds of the
offering of the notes. In particular, our insurance subsidiaries are subject to
extensive regulation in their respective jurisdictions that limits loans, the
transfer of assets, or payments by such insurance subsidiaries to their
affiliates, including North American Van Lines. Such regulation could limit
North American Van Lines' ability to draw on these insurance subsidiaries'
assets to repay its indebtedness, including the notes. See "Business--Government
Regulation."
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Additionally, those subsidiaries that are not guaranteeing the notes may
generate substantial revenue that will not be available to pay the notes unless
and until such revenue is distributed to North American Van Lines or an
intermediate parent company that does guarantee the notes. Furthermore, the
payment of interest and principal on intercompany loans and advances as well as
the payment of dividends by North American Van Lines' subsidiaries may be
taxable.
We cannot assure you that our operations will generate sufficient cash flow
to support payment of the notes, or that dividends, distributions, loans or
other funds will be available from North American Van Lines' subsidiaries to
fund these payments.
WE MAY NOT BE ABLE TO FINANCE A CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
If we undergo particular types of changes of control, we may be required to
offer to repurchase all outstanding notes. However, we cannot assure you that
sufficient funds will be available at the time of such occurrences to make any
required repurchases of notes tendered or that restrictions in our senior credit
facility or the debt agreements of SIRVA will allow us to make such required
repurchases. Notwithstanding these provisions, we could enter into certain
transactions, including certain recapitalizations, that would not constitute a
change of control as defined in the indenture but would increase the amount of
debt outstanding at such time. See "Description of Notes--Change of Control."
THERE MAY BE NO PUBLIC TRADING MARKET FOR THE NOTES, AND YOUR ABILITY TO
TRANSFER THEM IS LIMITED. IN ADDITION, THE NOTES MAY, IF TRADED AT ALL, TRADE AT
A DISCOUNT FROM THEIR INITIAL OFFERING PRICE.
No active trading market currently exists for the notes. If these securities
are traded after we issue them, they may trade at a discount from their initial
offering price, depending on prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and our
financial condition, performance and prospects, as well as recommendations of
securities analysts. We cannot assure you that an active trading market for the
notes will develop or, if one does develop, that it will be sustained. The
liquidity of, and trading market for, the notes may also be impacted by declines
in the market for high yield securities generally. Such a decline may materially
and adversely affect any liquidity and trading of the notes independent of our
financial performance and prospects.
UNDER CERTAIN CIRCUMSTANCES, A COURT COULD AVOID OR SUBORDINATE THE AMOUNTS
OWING UNDER THE GUARANTEES AND THE NOTES TO OUR PRESENTLY EXISTING AND FUTURE
INDEBTEDNESS, AND COULD TAKE OTHER ACTIONS DETRIMENTAL TO YOUR INTERESTS AS A
NOTE HOLDER.
Under federal or state fraudulent transfer laws, the indebtedness
represented by the notes and/or the note guarantees may be avoided or the claims
on this indebtedness could be subordinated to our other debt if, among other
things,
(1) the notes and/or the note guarantees were incurred with an intent to hinder,
delay or defraud creditors or
(2) less than a reasonably equivalent value or fair consideration was received
for the incurrence of this indebtedness and North American Van Lines or any
note guarantor
(A) was insolvent or rendered insolvent by reason of such incurrence,
(B) was engaged in a business or transaction for which its remaining assets
constituted unreasonably small amount of capital, or
(C) intended to incur, or believed that it would incur, debts beyond its
ability to pay as they matured.
If a court were to find that North American Van Lines or such note guarantor
came within clause (1) or (2) above, North American Van Lines or such note
guarantor, or its creditors or the trustee in
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bankruptcy, could seek to avoid the grant of security interests to the lenders
under our senior credit facility. This would result in an event of default with
respect to indebtedness incurred under our senior credit facility which, under
the terms of such indebtedness, depending on applicable law, would allow the
lenders to terminate their obligations under our senior credit facility and to
accelerate payment of such indebtedness.
The measure of insolvency for purposes of the foregoing will vary depending
upon which jurisdiction's law is applied. Generally, however, a company would be
considered insolvent for purposes of the foregoing if, at the time it incurred
the indebtedness:
- the sum of such company's debts including contingent liabilities is
greater than all such company's property at a fair valuation;
- the present fair saleable value of such company's assets is less than
the amount that will be required to pay its probable liability on its
existing debts and liabilities (including contingent liabilities) as
they become absolute and matured; or
- the company incurred obligations beyond its ability to pay as such
obligations become due.
There can be no assurance as to what standards a court would use to determine
whether North American Van Lines or a note guarantor was solvent at the relevant
time, or whether, whatever standards were applied, the notes or the note
guarantees would not be avoided or further subordinated on any of the grounds
set forth above.
RISKS RELATING TO OUR COMPANY
WE HAVE A HISTORY OF NET LOSSES, AND MAY NOT BE PROFITABLE IN THE FUTURE.
Since our acquisition by Clayton, Dubilier & Rice Fund V Limited Partnership
in March of 1998, we have had significant interest expense. Following the Allied
Acquisition, we continue to have a substantial amount of interest expense. We
reported net losses of $1.2 million, $19.9 million, $17.1 million,
$10.9 million and $3.3 million for the nine month period ended December 26,
1998, the year ended December 25, 1999, the years ended December 31, 2000 and
2001 and the three month period ending March 31, 2002, respectively.
We expect that continued development of our business will require
significant additional capital expenditures. We expect that these continued
expenses will result in future net losses and affect our ability to reduce our
leverage.
WE MAY NOT BE ABLE TO RECRUIT AND RETAIN A SUFFICIENT NUMBER OF AGENTS,
REPRESENTATIVES OR OWNER/OPERATORS TO CARRY OUT OUR GROWTH PLANS.
We rely on the services of agents to market our services and to act as
intermediaries with customers, and on agents and owner/operators to provide a
significant portion of our packing, warehousing and hauling services. Although
we believe our relationships with our agents and owner/operators are good, we
have had some difficulty in obtaining or retaining qualified owner/operators in
the past due to other available employment choices with more earnings potential
or individuals' desire to pursue a lifestyle that is not "on-the-road." We
recently concluded negotiations with the Allied agents for a new agency
contract, with a term extending to early 2005, which is being executed by agents
currently. There is no assurance that every Allied agent will agree to execute
that contract. Although we have experienced relatively low agent turnover in the
past, we cannot assure you that these contracts will be renewed on favorable
terms or at all. Allied agents who have not yet signed the agreement represent
approximately 7.9% of 2001 van line network segment revenue.
Our agents are independent businesses that provide marketing and other
services to us while also offering local and intrastate moving and storage
services to their own customers. Generally, there are few
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additional new entrants into this business and thus recruiting new agents often
requires a conversion of an agent from a competing van line. Competing van lines
also recruit our agents. However, there is significant cost for an agent to
transition from one van line to another in terms of change of trademarks,
signage and business process.
Owner/operators are independent contractors who own their own trucks and
provide hauling and other services. Fluctuations in the economy and fuel prices,
as well as a lifestyle that requires drivers to be away from home often from
four to eight weeks at a time, create challenges for new entrants to that
business. Further, competition for long haul owner/operators is strong among
competing van lines.
We cannot assure you that we will be successful in retaining our agents or
owner/operators or that agents or owner/operators that terminate their contracts
can be replaced by equally qualified personnel. A loss in the number of
qualified drivers could lead to an increased frequency of accidents, potential
claims exposure and, indirectly, insurance costs. Because agents have the
primary relationship with customers, we expect that some customers would
terminate their relationship with us were the agent that handles such customers'
business to terminate its relationship with us.
WE MAY HAVE DIFFICULTY INTEGRATING OR ENHANCING SOPHISTICATED INFORMATION
SYSTEMS. ANY SUCH DIFFICULTIES COULD DELAY OR DISRUPT OUR ABILITY TO SERVICE OUR
CUSTOMERS OR IMPAIR OUR COMPETITIVENESS.
Sophisticated information systems are vital to our growth and our ability to
manage and monitor the flow of goods we are transporting and to provide
attractive logistics solutions services, which depend on technologically
advanced systems. As these systems are evolving rapidly, we will need to
continually enhance them. We may encounter difficulties in enhancing these
systems or in integrating new technology into our systems in a timely and
cost-effective manner. Such difficulties could have a material adverse effect on
our ability to operate efficiently and to provide competitive customer service.
To compete effectively, we must anticipate and adapt to technological
changes and offer, on a timely basis, competitively priced services that meet
evolving industry standards and customer preferences. We may choose new
technologies that later prove to be inadequate, or may be forced to implement
new technologies at substantial cost to remain competitive. In addition,
competitors may implement new technologies before we do, allowing such
competitors to provide lower priced or enhanced services and superior quality
compared to those we provide. This development could have a material adverse
effect on our ability to compete.
We are currently in the process of evaluating a vendor to provide the
outsourcing of 100% of our information systems infrastructure and, initially,
50% of our application software development. Certain of the application software
development may be provided by entities outside of the U.S. We anticipate
signing a definitive agreement with a vendor later in the second quarter of
2002.
OUR OWNER/OPERATORS ARE CURRENTLY NOT CONSIDERED TO BE EMPLOYEES BY TAXING AND
OTHER REGULATORY AUTHORITIES. SHOULD THESE AUTHORITIES CHANGE THEIR POSITION AND
CONSIDER OUR OWNER/OPERATORS TO BE OUR EMPLOYEES, OUR COSTS RELATED TO OUR TAX,
UNEMPLOYMENT COMPENSATION AND WORKERS' COMPENSATION PAYMENTS COULD INCREASE
SIGNIFICANTLY.
From time to time, certain parties, including the Internal Revenue Service,
state authorities and the owners/operators themselves, have sought to assert
that owner/operators in the trucking industry are employees rather than
independent contractors. To date, these parties have not been successful in
making these assertions against us. We consider all of our owner/operators to be
independent contractors. We cannot assure you that tax authorities will not
successfully challenge this position, that interpretations supporting our
position will not change, or that federal and state tax or other applicable laws
will not change. If owner/operators were deemed to be employees, our costs
related to tax, unemployment compensation, and workers' compensation could
increase significantly. In addition, such changes may be
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applied retroactively, and if so we may be required to pay additional amounts to
compensate for prior periods.
WE ARE DEPENDENT ON OUR HIGHLY TRAINED EXECUTIVE OFFICERS AND EMPLOYEES. ANY
DIFFICULTY IN MAINTAINING OUR CURRENT EMPLOYEES OR IN HIRING SIMILAR EMPLOYEES
WOULD ADVERSELY AFFECT OUR ABILITY TO OPERATE OUR BUSINESS.
Our operations are managed by a small number of key executive officers. The
loss of any of these individuals could have a material adverse effect on us. In
addition, our success depends on our ability to continue to attract, recruit and
retain sufficient qualified personnel in an increasingly technology-based
industry as we grow. Competition for qualified personnel is intense. We cannot
assure you that we will be able to retain senior management, integrate new
managers, or recruit qualified personnel in the future.
WE ARE CONTROLLED BY PARTIES WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS.
As of May 20, 2002, Clayton, Dubilier & Rice Fund V Limited Partnership
indirectly held approximately 57.6% of our capital stock on an undiluted basis
and 52.6% on a fully diluted basis, and Clayton, Dubilier & Rice Fund VI Limited
Partnership indirectly held approximately 24.0% of our capital stock on an
undiluted basis and 21.9% on a fully diluted basis. Such ownership may present
conflicts of interest between these owners and you if we encounter financial
difficulties. These owners could cause us to effect decisions affecting our
capital structure, including the incurrence of additional indebtedness, issuance
of preferred stock and the declaration of dividends.
RISKS RELATING TO OUR INDUSTRY
POTENTIAL LIABILITY ASSOCIATED WITH ACCIDENTS IN THE TRUCKING TRANSPORTATION
INDUSTRY IS SEVERE AND OCCURRENCES ARE UNPREDICTABLE. IN ADDITION, AN INCREASE
IN LIABILITY, PROPERTY OR CASUALTY INSURANCE PREMIUMS COULD CAUSE US TO INCUR
SIGNIFICANT COSTS.
We use the services of a significant number of drivers in connection with
our pick-up and delivery operations, and from time to time such drivers are
involved in accidents. Potential liability associated with accidents in the
trucking industry may be severe and occurrences are unpredictable. We are also
subject to substantial exposure due to workers' compensation and cargo claims
expense, whether or not injuries or damage occur in the context of a traffic
accident.
We carry insurance to cover liability and workers' compensation claims. We
cannot assure you, however, that our insurance will be adequate to cover all of
our liabilities. To the extent we were to experience a material increase in the
frequency or severity of accidents, cargo claims or workers' compensation
claims, or in the unfavorable resolution of existing claims, we might be
required to incur substantial costs to cover these claims. In addition, our
results of operations would be adversely affected if the premiums for our
liability, workers' compensation and casualty claims were to increase
substantially.
OUR OPERATING RESULTS ARE SUBJECT TO CUSTOMER DEMAND.
We serve numerous industries and customers that experience significant
fluctuations in demand based on economic conditions and other factors beyond our
control. Demand for our services could be materially adversely affected by
downturns in the business of our corporate customers or a decrease in the
frequency of household moves. As a result, our business and financial condition
could be adversely affected.
IF WE DO NOT SUCCESSFULLY COMPETE WITHIN THE HIGHLY COMPETITIVE RELOCATION AND
LOGISTICS SERVICES INDUSTRY, WE MAY BE UNABLE TO REPAY THE NOTES.
The relocation services business is highly competitive and fragmented. Aside
from the handful of large van lines and relocation services companies, the
industry remains extremely fragmented with many small private participants that
may have strong positions in local markets. We compete primarily with truckload
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carriers and independent contractors and, with respect to certain aspects of our
business, relocation services companies, intermodal transportation, railroads
and less-than-truckload carriers. Intermodal transportation (the hauling of
truck trailers or containers on rail cars or ships) has increased in recent
years as reductions in train crew size and the development of new rail
technology have reduced costs of intermodal shipping. The logistics industry is
becoming increasingly consolidated due to, among other things, the need for
global distribution networks, large vehicle fleets and global information
technology systems. In addition, consolidation is driven by customers' desire
for integrated services, the high growth in international and cross-border
delivery segments and, in Europe, the deregulation of European delivery markets.
Industry participants are acquiring, merging with or forming alliances with
partners that can expand global reach, breadth of services or technological
capabilities in order to better enable those participants to compete in a
rapidly changing global environment. If we do not successfully compete within
the highly competitive relocation and logistics services industry, we may be
unable to pay the notes.
IF WE LOST ONE OR MORE OF OUR GOVERNMENT LICENSES OR PERMITS OR BECAME SUBJECT
TO MORE ONEROUS GOVERNMENT REGULATIONS, WE COULD BE ADVERSELY AFFECTED.
Our operations are subject to a number of complex and stringent
transportation, environmental, labor, employment and other laws and regulations.
These laws and regulations generally require us to maintain a wide variety of
certificates, permits, licenses and other approvals. Our failure to maintain
required certificates, permits or licenses, or to comply with applicable laws,
ordinances or regulations, could result in substantial fines or possible
revocation of our authority to conduct our operations, which in turn could
restrict our ability to conduct our business effectively and to provide
competitive customer services and thereby have an adverse impact on our
financial condition.
We cannot assure you that existing laws or regulations will not be revised
or that new more restrictive laws or regulations will not be adopted or become
applicable to us. We also cannot assure you that we will be able to recover any
or all increased costs of compliance from our customers or that our business and
financial condition will not be materially and adversely affected by future
changes in applicable laws and regulations. See "Business--Government
Regulation."
THE INTERNATIONAL SCOPE OF OUR OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.
We may face certain risks because we conduct an international business,
including:
- regulatory restrictions or prohibitions on the provision of our services;
- restrictions on foreign ownership of subsidiaries;
- tariffs and other trade barriers;
- longer payment cycles;
- problems in collecting accounts receivables;
- political risks; and
- potentially adverse tax consequences of operating in multiple
jurisdictions.
Current world events, including the September 11, 2001 attacks against the
United States, the U.S. retaliation for those attacks, the armed conflict in the
Middle East and political volatility in the Middle East and central and south
Asia could have a material adverse effect on our business as a global relocation
services provider by reducing the demand for relocation and logistics services
in locations affected by such events and by disrupting global financial markets
or our access to them.
In addition, an adverse change in laws or administrative practices in
countries within which we operate could have a material adverse effect on us.
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We are exposed to fluctuation in foreign currencies, as our revenues, costs,
assets and liabilities are denominated in multiple local currencies. Our payment
obligations with respect to the notes and a significant amount of our other
indebtedness are denominated in U.S. Dollars, but a substantial portion of our
revenues is denominated in other currencies as well. Any appreciation in the
value of the U.S. Dollar relative to such currencies could have an adverse
effect on us.
EVENTS DESCRIBED BY OUR FORWARD LOOKING STATEMENTS MAY NOT OCCUR.
This prospectus contains "forward-looking statements." You should not place
undue reliance on these statements. Forward-looking statements include
information concerning our possible or assumed future results of operations,
including descriptions of our business strategies. These statements often
include words such as "believe," "expect," "anticipate," "intend," "plan,"
"estimate," "seek," "will," "may" or similar expressions. These statements are
based on certain assumptions that we have made in light of our experience in the
industry as well as our perceptions of historical trends, current conditions,
expected future developments and other factors we believe are appropriate in
these circumstances. As you read and consider this prospectus, you should
understand that these statements are not guarantees of performance or results.
They involve risks, uncertainties and assumptions. Many factors could affect our
actual financial results or results of operations and could cause actual results
to differ materially from those in the forward-looking statements. Some
important factors include:
- operations and prospects,
- ability to achieve estimated cost savings,
- funding needs and financing sources,
- expected financial position,
- business and financing plans,
- realization of deferred tax assets,
- future cash flows for restructuring and expected benefits,
- availability of cash to pay liabilities,
- markets, including the future growth of the logistics and relocation
markets,
- expected characteristics of competition,
- ability to consummate potential acquisitions,
- expected actions of third parties such as agents, representatives,
owner/operators and suppliers and
- various other factors beyond our control.
We undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by those cautionary statements.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur and you should not place
undue reliance upon them.
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THE EXCHANGE OFFER
The following contains a summary of the material provisions of the
registration rights agreement. It does not contain all of the information that
may be important to an investor in the notes. Reference is made to the
provisions of the registration rights agreement, which has been filed as an
exhibit to the registration statement. Copies are available as set forth under
the heading "Where You Can Find More Information."
TERMS OF THE EXCHANGE OFFER
GENERAL. In connection with the issuance of the old notes pursuant to a
purchase agreement, dated as of November 12, 1999, between North American Van
Lines and the initial purchasers, the initial purchasers and their respective
assignees became entitled to the benefits of the registration rights agreement.
Under the registration rights agreement, we have agreed (1) to use our
commercially reasonable best efforts to cause to be filed with the Commission
the registration statement of which this prospectus is a part with respect to a
registered offer to exchange the old notes for the new notes and (2) to use all
commercially reasonable efforts to cause the registration statement to be
declared effective under the Securities Act within 210 calendar days after the
initial issuance of the old notes. We will keep the exchange offer open for the
period required by applicable law, but in any event for at least ten business
days after the date notice of the exchange offer is mailed to holders of the old
notes. Because the exchange offer was not consummated on or before the 240th day
after the original issue date of the old notes, the interest rate borne by such
old notes was increased by 0.50% per annum in the aggregate. This additional
interest will accrue until the exchange offer is consummated.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, all old notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New notes will be issued in exchange for an equal
principal amount of outstanding old notes accepted in the exchange offer. Old
notes may be tendered only in integral multiples of $1,000. This prospectus,
together with the letter of transmittal, is being sent to all registered holders
as of June 25, 2002. The exchange offer is not conditioned upon any minimum
principal amount of old notes being tendered for exchange. However, the
obligation to accept old notes for exchange pursuant to the exchange offer is
subject to certain customary conditions as set forth herein under
"--Conditions."
Old notes shall be deemed to have been accepted as validly tendered when, as
and if we have given oral or written notice of such acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders of old
notes for the purposes of receiving the new notes and delivering new notes to
such holders.
Based on interpretations by the Staff of the Commission as set forth in
no-action letters issued to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)), we believe that the new
notes issued pursuant to the exchange offer may be offered for resale, resold
and otherwise transferred by any holder of such new notes, other than any such
holder that is a broker-dealer or an "affiliate" of us within the meaning of
Rule 405 under the Securities Act, without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that:
- such new notes are acquired in the ordinary course of business,
- at the time of the commencement of the exchange offer such holder has no
arrangement or understanding with any person to participate in a
distribution of such new notes, and
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- such holder is not engaged in, and does not intend to engage in, a
distribution of such new notes.
We have not sought, and do not intend to seek, a no-action letter from the
Commission with respect to the effects of the exchange offer, and there can be
no assurance that the Staff would make a similar determination with respect to
the new notes as it has in such no-action letters.
By tendering old notes in exchange for new notes and executing the letter of
transmittal, each holder will represent to us that:
- any new notes to be received by it will be acquired in the ordinary
course of business,
- it has no arrangements or understandings with any person to participate
in the distribution of the old notes or new notes within the meaning of
the Securities Act, and
- it is not our "affiliate," as defined in Rule 405 under the Securities
Act.
If such holder is a broker-dealer, it will also be required to represent that
the old notes were acquired as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with any
resale of new notes. See "Plan of Distribution." Each holder, whether or not it
is a broker-dealer, shall also represent that it is not acting on behalf of any
person that could not truthfully make any of the foregoing representations
contained in this paragraph. If a holder of old notes is unable to make the
foregoing representations, such holder may not rely on the applicable
interpretations of the Staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
Each broker-dealer that receives new notes for its own account in exchange
for old notes where such new notes were acquired by such broker-dealer as a
result of market-making or other trading activities, must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act and
that it has not entered into any arrangement or understanding with us or an
affiliate of ours to distribute the new notes in connection with any resale of
such new notes. See "Plan of Distribution."
Upon consummation of the exchange offer, any old notes not tendered will
remain outstanding and continue to accrue interest at the rate of 13 3/8% but,
with limited exceptions, holders of old notes who do not exchange their old
notes for new notes in the exchange offer will no longer be entitled to
registration rights and will not be able to offer or sell their old notes,
unless such old notes are subsequently registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. With limited exceptions, we
will have no obligation to effect a subsequent registration of the old notes.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION. The Expiration Date
shall be July 24, 2002, unless North American Van Lines, in its sole discretion,
extends the exchange offer, in which case the Expiration Date shall be the
latest date to which the exchange offer is extended.
To extend the Expiration Date, we will notify the exchange agent of any
extension by oral or written notice and will notify the holders of old notes by
means of a press release or other public announcement prior to 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that we are extending the exchange
offer for a specified period of time.
We reserve the right
(1) to delay acceptance of any old notes, to extend the exchange offer or to
terminate the exchange offer and not permit acceptance of old notes not
previously accepted if any of the conditions set forth under
"--Conditions" shall have occurred and shall not have been waived by us
prior to the Expiration Date, by giving oral or written notice of such
delay, extension or termination to the exchange agent, or
17
<Page>
(2) to amend the terms of the exchange offer in any manner deemed by us to
be advantageous to the holders of the old notes.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice of such delay,
extension, termination or amendment to the exchange agent. If the exchange offer
is amended in a manner determined by us to constitute a material change, we will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the old notes of such amendment.
Without limiting the manner in which we may choose to make public
announcement of any delay, extension, amendment or termination of the exchange
offer, we shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW NOTES
Each new note will accrue interest at the rate of 13 7/8% per annum from the
last interest payment date on which interest was paid on the old note
surrendered in exchange for such new note to the day before the consummation of
the exchange offer and thereafter, at the rate of 13 3/8% per annum, PROVIDED,
that if an old note is surrendered for exchange on or after a record date for an
interest payment date that will occur on or after the date of such exchange and
as to which interest will be paid, interest on the new note received in exchange
for such old note will accrue from the date of such interest payment date.
Interest on the new notes is payable on December 1 and June 1 of each year. No
additional interest will be paid on old notes tendered and accepted for
exchange.
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must complete, sign and date the
letter of transmittal, or a facsimile of such letter of transmittal, have the
signatures on such letter of transmittal guaranteed if required by such letter
of transmittal, and mail or otherwise deliver such letter of transmittal or such
facsimile, together with any other required documents, to the exchange agent
prior to 5:00 p.m., New York City time, on the Expiration Date. In addition,
either
- certificates of old notes must be received by the exchange agent along
with the applicable letter of transmittal, or
- a timely confirmation of a book-entry transfer of such old notes, if such
procedure is available, into the exchange agent's account at the
book-entry transfer facility, The Depository Trust Company, pursuant to
the procedure for book-entry transfer described below, must be received
by the exchange agent prior to the Expiration Date with the applicable
letter of transmittal, or
- the holder must comply with the guaranteed delivery procedures described
below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE NOTE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO OLD NOTES, LETTERS OF TRANSMITTAL OR OTHER
REQUIRED DOCUMENTS SHOULD BE SENT TO US. Delivery of all old notes (if
applicable), letters of transmittal and other documents must be made to the
exchange agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of old notes will constitute an agreement between
such holder and us in accordance with the terms and subject to the conditions
set forth in this prospectus and in the applicable letter of transmittal. Any
beneficial owner whose old notes are registered in the name of a broker, dealer,
18
<Page>
commercial bank, trust company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct such registered holder to
tender on his behalf.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934 (each, an "Eligible
Institution") unless the old notes tendered pursuant to such letter of
transmittal or notice of withdrawal, as the case may be are tendered (1) by a
registered holder of old notes who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter of
transmittal or (2) for the account of an Eligible Institution.
If a letter of transmittal is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and unless waived by us, provide evidence satisfactory to us of their
authority to so act must be submitted with such letter of transmittal.
All questions as to the validity, form, eligibility, time of receipt and
withdrawal of the tendered old notes will be determined by us in our sole
discretion, which determination will be final and binding. We reserve the
absolute right to reject any and all old notes not properly tendered or any old
notes which, if accepted, would, in the opinion of counsel for us, be unlawful.
We also reserve the absolute right to waive any irregularities or conditions of
tender as to particular old notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes must be cured
within such time as we shall determine. Neither we, the exchange agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of old notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of old notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any old note received by the exchange agent that is not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost to such holder by the exchange agent,
unless otherwise provided in the letter of transmittal, as soon as practicable
following the Expiration Date.
In addition, we reserve the right in our sole discretion, subject to the
provisions of the indentures pursuant to which the notes are issued,
- to purchase or make offers for any old notes that remain outstanding
subsequent to the Expiration Date or, as set forth under "--Conditions,"
to terminate the exchange offer,
- to redeem old notes as a whole or in part at any time and from time to
time, as set forth under "Description of Notes--Optional Redemption,"
and
- to the extent permitted under applicable law, to purchase old notes in
the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
exchange offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
all old notes properly tendered will be accepted promptly after the Expiration
Date, and the new notes will be issued promptly after acceptance of the old
notes. See "--Conditions." For purposes of the exchange offer, old notes shall
be deemed to have been accepted as validly tendered for exchange when, as and if
we have given oral or written notice thereof to the exchange agent. For each old
note accepted for exchange, the holder of such old note will receive a new note
having a principal amount equal to that of the surrendered old note.
19
<Page>
In all cases, issuance of new notes for old notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of
- certificates for such old notes or a timely book-entry confirmation of
such old notes into the exchange agent's account at the applicable
book-entry transfer facility,
- a properly completed and duly executed letter of transmittal, and
- all other required documents.
If any tendered old notes are not accepted for any reason set forth in the terms
and conditions of the exchange offer, such unaccepted or such nonexchanged old
notes will be returned without expense to the tendering holder of such notes, if
in certificated form, or credited to an account maintained with such book-entry
transfer facility as promptly as practicable after the expiration or termination
of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at the book-entry transfer facility for purposes of the
exchange offer within two business days after the date of this prospectus. Any
financial institution that is a participant in the book-entry transfer
facility's systems may make book-entry delivery of old notes by causing the
book-entry transfer facility to transfer such old notes into the exchange
agent's account at the book-entry transfer facility in accordance with such
book-entry transfer facility's procedures for transfer. However, although
delivery of old notes may be effected through book-entry transfer at the
book-entry transfer facility, the letter of transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the exchange agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
EXCHANGING BOOK-ENTRY NOTES
The exchange agent and the book-entry transfer facility have confirmed that
any financial institution that is a participant in the book-entry transfer
facility may utilize the book-entry transfer facility Automated Tender Offer
Program ("ATOP") procedures to tender old notes.
Any participant in the book-entry transfer facility may make book-entry
delivery of old notes by causing the book-entry transfer facility to transfer
such old notes into the exchange agent's account in accordance with the
book-entry transfer facility's ATOP procedures for transfer. However, the
exchange for the old notes so tendered will only be made after a book-entry
confirmation of the book-entry transfer of old notes into the exchange agent's
account, and timely receipt by the exchange agent of an agent's message and any
other documents required by the letter of transmittal. The term "agent's
message" means a message, transmitted by the book-entry transfer facility and
received by the exchange agent and forming part of a book-entry confirmation,
which states that the book-entry transfer facility has received an express
acknowledgment from a participant tendering old notes that are the subject of
such book-entry confirmation that such participant has received and agrees to be
bound by the terms of the letter of transmittal, and that we may enforce such
agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if
- the tender is made through an Eligible Institution,
20
<Page>
- prior to the Expiration Date, the exchange agent receives by facsimile
transmission, mail or hand delivery from such Eligible Institution a
properly completed and duly executed letter of transmittal and notice of
guaranteed delivery, substantially in the form provided by us, which
(1) sets forth the name and address of the holder of old notes and the
amount of old notes tendered,
(2) states that the tender is being made thereby, and
(3) guarantees that within three New York Stock Exchange ("NYSE") trading
days after the date of execution of the notice of guaranteed
delivery, the certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation, as the case
may be, and any other documents required by the letter of transmittal
will be deposited by the Eligible Institution with the exchange
agent, and
- the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation, as the case may be, and all
other documents required by the letter of transmittal are received by the
exchange agent within three NYSE trading days after the date of execution
of the notice of guaranteed delivery.
WITHDRAWAL OF TENDERS
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time, on the
Expiration Date at the address set forth below under "--Exchange Agent." Any
such notice of withdrawal must
- specify the name of the person having tendered the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the principal amount
of such old notes,
- in the case of old notes tendered by book-entry transfer, specify the
number of the account at the book-entry transfer facility from which the
old notes were tendered and specify the name and number of the account
at the book-entry transfer facility to be credited with the withdrawn
old notes and otherwise comply with the procedures of such facility,
- contain a statement that such holder is withdrawing its election to have
such old notes exchanged,
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer to have the trustee with respect to the old notes
register the transfer of such old notes in the name of the person
withdrawing the tender, and
- specify the name in which such old notes are registered, if different
from the person who tendered such old notes.
All questions as to the validity, form, eligibility and time of receipt of such
notice will be determined by us, which determination shall be final and binding
on all parties. Any old notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Any old notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the tendering holder of such notes without cost to such
holder, in the case of physically tendered old notes, or credited to an account
maintained with the book-entry transfer facility for the old notes as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn old notes may be retendered by following one of the
procedures described under "--Procedures for
21
<Page>
Tendering" and "--Book-Entry Transfer" above at any time on or prior to
5:00 p.m., New York City time, on the Expiration Date.
CONDITIONS
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue new notes in exchange for, any old
notes and may terminate or amend the exchange offer if at any time prior to
5:00 p.m., New York City time, on the Expiration Date, we determine in our
reasonable judgment that the exchange offer violates applicable law, any
applicable interpretation of the Staff of the Commission or any order of any
governmental agency or court of competent jurisdiction.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our
reasonable discretion. Our failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
In addition, we will not accept for exchange any old notes tendered, and no
new notes will be issued in exchange for any such old notes, if at such time any
stop order shall be threatened or in effect with respect to the registration
statement of which this prospectus constitutes a part or the qualification of
either indenture under the Trust Indenture Act of 1939, as amended. We are
required to use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible time.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as exchange agent for
the exchange offer. Questions and requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent addressed as follows:
<Table>
BY MAIL, HAND DELIVERY OR FOR INFORMATION CALL:
OVERNIGHT COURIER: (617) 662-1525
State Street Bank and Trust Company FACSIMILE TRANSMISSION NUMBER:
Corporate Trust Department (617) 662-1452
5th Floor CONFIRM BY TELEPHONE:
2 Avenue de Lafayette (617) 662-1603
Boston, Massachusetts 02111
Attention: Mackenzie Elijah
</Table>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by us. The principal solicitation for tenders pursuant to the exchange
offer is being made by mail; however, additional solicitations may be made by
telegraph, telephone, telecopy or in person by our officers and regular
employees.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection
therewith. We may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the prospectus and related documents to the beneficial owners of the
old notes, and in handling or forwarding tenders for exchange.
22
<Page>
The expenses to be incurred by us in connection with the exchange offer will
be paid by us, including fees and expenses of the exchange agent and trustee and
accounting, legal, printing and related fees and expenses.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, new notes or old notes for
principal amounts not tendered or accepted for exchange are to be registered or
issued in the name of any person other than the registered holder of the old
notes tendered, or if tendered old notes are registered in the name of any
person other than the person signing the letter of transmittal, or if a transfer
tax is imposed for any reason other than the exchange of old notes pursuant to
the exchange offer, then the amount of any such transfer taxes imposed on the
registered holder or any other persons will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who do not exchange their old notes for new notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of such old notes as set forth in the legend on the old notes as a
consequence of the issuance of the old notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the old notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. North American Van Lines does not currently
anticipate that it will register the old notes under the Securities Act. To the
extent that old notes are tendered and accepted in the exchange offer, the
trading market for untendered and tendered but unaccepted old notes could be
adversely affected because the liquidity of this market will be diminished and
their restrictions on transfer will make them less attractive to potential
investors than the new notes.
REGULATORY REQUIREMENTS
Following the effectiveness of the registration statement covering the
exchange offer, no material federal or state regulatory requirement must be
complied with in connection with this exchange offer.
23
<Page>
USE OF PROCEEDS
There will be no proceeds from the issuance of new notes pursuant to the
exchange offer.
The net proceeds from the original offering were $145.4 million, after
deducting discounts and commissions and expenses of the original offering
payable by North American Van Lines. We used the net proceeds from the original
offering primarily to finance the Allied Acquisition.
24
<Page>
CAPITALIZATION
The following table sets forth NAVL's total capitalization at March 31,
2002. This table should be read in conjunction with the audited and unaudited
financial statements and related notes appearing elsewhere in this prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<Table>
<Caption>
AS OF
MARCH 31, 2002
----------------------
(DOLLARS IN THOUSANDS)
Cash and cash equivalents................................... $ 25,646
========
Debt, including current maturities:
Revolving credit facility................................. $ 56,600
Term loans................................................ 284,596
Notes..................................................... 150,000
Other debt(1)............................................. 22,227
--------
Total debt.............................................. 513,423
Stockholders' equity........................................ 118,419
--------
Total capitalization........................................ $631,842
========
</Table>
- ------------------------
(1) Comprised of capital lease obligations of $20,164, NAVL foreign subsidiary
borrowings on lines of credit of $855 and other debt of $1,208.
25
<Page>
SELECTED HISTORICAL FINANCIAL DATA
We derived our selected historical financial data for the years 1997 and
1999 through 2001 and for the three month period ended March 28, 1998 and for
the nine month period ended December 26, 1998 from our audited financial
statements or those of our predecessor for the periods then ended. Our selected
historical financial data for the periods presented ending after November 19,
1999 (the date of completion of the Allied Acquisition) includes financial data
of Allied. Our selected historical financial data as of and for the three months
ended March 31, 2002 and 2001, respectively, are derived from our unaudited
interim financial statements. The unaudited interim financial statements reflect
all adjustments which, in the opinion of management, are necessary for a fair
statement of the financial condition and results of operations as of and for the
periods presented. Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the full year. The
presentation of selected historical financial data is only a summary and you
should read it together with our historical financial statements and related
notes.
<Table>
<Caption>
ANNUAL DATA
------------------------------------------------------------------------------------------
PREDECESSOR(1) NAVL
----------------------------- ----------------------------------------------------------
NINE MONTH
THREE MONTH PERIOD FROM
PERIOD FROM MARCH 29,
DECEMBER 28, 1998
1997 (INCEPTION)
YEAR ENDED THROUGH THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 27, MARCH 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1999(2) 2000(2)(3) 2001(2)(3)
------------- ------------- ------------- ------------ ------------ ------------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Operating revenues................... $ 941.5 $ 207.3 $ 759.2 $1,159.8 $2,378.7 $2,249.3
Restructuring and other unusual
charges(4)......................... (5.5) 4.6 -- 9.1 4.9 4.9
Income/(loss) from operations........ 31.2 (1.3) 11.5 (1.1) 49.8 53.3
Income/(loss) from continuing
operations......................... 20.0 (0.7) (1.2) (16.5) (17.1) (10.6)
Discontinued operations--income net
of income taxes(5)................. 2.3 -- -- -- -- --
Income/(loss) before extraordinary
charge............................. 22.3 (0.7) (1.2) (16.5) (17.1) (10.6)
Extraordinary charge--debt
retirement, net of income tax
benefit(6)......................... -- -- -- (3.4) -- --
Income (loss) before cumulative
effect of accounting change........ 22.3 (0.7) (1.2) (19.9) (17.1) (10.6)
Cumulative effect of accounting
change, net of tax(7).............. -- -- -- -- -- (0.3)
Net income (loss).................... 22.3 (0.7) (1.2) (19.9) (17.1) (10.9)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents............ $ 2.9 $ 9.2 $ 2.1 $ 25.2 $ 43.5 $ 32.1
Working capital...................... 62.0 63.2 31.4 32.7 13.7 (28.2)
Property and equipment, net.......... 57.8 56.4 73.6 165.9 158.7 165.4
Total assets......................... 302.3 284.3 392.1 1,162.1 1,216.6 1,095.8
Total debt(8)........................ 0.7 0.7 168.6 554.8 562.6 525.0
Stockholder's equity................. 108.1 101.0 63.7 167.7 145.1 121.8
OTHER DATA:
Net cash provided by (used for)
operating activities............... $ 28.9 $ 10.3 $ (1.6) $ 11.6 $ 52.8 $ 111.3
Capital expenditures................. 10.6 1.4 5.7 12.7 55.4 48.3
Agent contract expenditures(9)....... 9.2 2.2 1.5 1.8 2.2 1.4
Depreciation and amortization(10).... 12.5 2.9 22.5 31.2 53.9 48.7
Ratio of earnings to fixed
charges(11)........................ 7.61 0.01 1.74 0.96 1.63 1.66
EBITDA, as defined(12)............... 38.2 6.2 34.0 43.4 130.2 125.0
<Caption>
THREE MONTH DATA
---------------------------
(UNAUDITED)
---------------------------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2001 2002
------------ ------------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Operating revenues................... $ 510.4 $ 429.7
Restructuring and other unusual
charges(4)......................... 0.2 (0.7)
Income/(loss) from operations........ (4.4) 6.2
Income/(loss) from continuing
operations......................... 5.2 (3.3)
Discontinued operations--income net
of income taxes(5)................. -- --
Income/(loss) before extraordinary
charge............................. 5.2 (3.3)
Extraordinary charge--debt
retirement, net of income tax
benefit(6)......................... -- --
Income (loss) before cumulative
effect of accounting change........ 5.2 (3.3)
Cumulative effect of accounting
change, net of tax(7).............. (0.3) --
Net income (loss).................... 4.9 (3.3)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents............ 37.2 $ 25.6
Working capital...................... 20.8 (42.4)
Property and equipment, net.......... 153.2 165.1
Total assets......................... 1,153.3 1,042.3
Total debt(8)........................ 558.6 513.4
Stockholder's equity................. 139.3 118.4
OTHER DATA:
Net cash provided by (used for)
operating activities............... $ 5.3 $ 16.1
Capital expenditures................. 9.8 8.6
Agent contract expenditures(9)....... 0.3 0.3
Depreciation and amortization(10).... 12.0 8.6
Ratio of earnings to fixed
charges(11)........................ 0.78 1.36
EBITDA, as defined(12)............... 12.8 16.0
</Table>
- ------------------------
(1) On March 29, 1998, SIRVA (whose majority shareholder is Clayton, Dubilier &
Rice Fund V Limited Partnership), through its wholly owned subsidiary NA
Acquisition, acquired all of the outstanding shares of
26
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common stock of North American Van Lines. On such date, NA Acquisition was
merged into North American Van Lines with North American Van Lines as the
surviving corporation and remaining a wholly owned subsidiary of SIRVA. The
acquisition was accounted for as a purchase in accordance with U.S. GAAP.
The consolidated financial statements for periods prior to March 29, 1998
have been prepared on the historical cost basis using accounting principles
that had been adopted by our predecessor. After our acquisition by Clayton,
Dubilier & Rice Fund V Limited Partnership on March 29, 1998, we changed our
accounting basis to recognize estimated revenue and related transportation
expenses when shipments are delivered, the preferred method under U.S. GAAP.
Our predecessor company recognized estimated revenue and related
transportation expenses when shipments were loaded. Management estimates
that the impact of this difference on reported operating revenues and income
from operations is not material.
(2) Includes financial data of Allied from November 19, 1999. On November 19,
1999, we completed the acquisition of Allied from Exel plc, formerly known
as NFC plc, which was accounted for as a purchase. The terms of the
acquisition provided for an adjustment to the purchase price pertaining to
the amount of net controllable assets acquired as of the date of the Allied
Acquisition. We were unable to negotiate the final amount of net
controllable assets acquired with Exel, and therefore, a third party
arbitator was engaged for resolution of that amount in accordance with the
terms of the acquisition agreement.
On September 12, 2001, the third party arbitrator rendered a binding
determination. The arbitrator determined that the amount of the net
controllable assets as of the acquisition date was greater than the amount
estimated in the acquisition agreement by $18.1 million, resulting in an
increase of the purchase price of $18.1 million. Interest on the purchase
price adjustment of $3.3 million was paid for the period from the
acquisition date to the date when we made payment and was accounted for as
interest expense. The acquisition agreement also contained indemnification
obligations on Exel for certain tax payments made by us on behalf of Exel.
These tax payments plus associated interest totaled $4.0 million and were
deducted from the purchase price adjustment. Our cash payment to Exel on
October 19, 2001, for the net balance owed to Exel totaled $17.4 million.
The purchase adjustment resulted in a net increase to goodwill of
$18.1 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Financial Condition--Allied Acquisition
and Arbitration Settlement."
(3) On December 31, 2001, we completed a stock-for-stock merger with Moveline,
Inc., under an agreement and plan of merger, dated as of November 9, 2001,
pursuant to which Moveline merged with one of our wholly owned subsidiaries
with such subsidiary as the surviving corporation. Under the terms of the
merger agreement, Moveline's stockholders received a fraction of a share of
common stock of our parent, SIRVA, for each Moveline share acquired in the
merger. Immediately following the merger, we contributed the surviving
subsidiary to Allied Van Lines, Inc., another of our wholly-owned
subsidiaries. Allied Van Lines subsequently merged with that subsidiary,
with Allied Van Lines as the surviving corporation. In connection with the
stock-for-stock merger, Clayton, Dubilier & Rice Fund V Limited Partnership
acquired 176,057 additional shares of common stock of SIRVA, Inc.
Moveline, which was founded and spun-off by SIRVA on August 1, 2000, had
developed and marketed a proprietary information technology-based customer
care solution that builds upon the relocation industry's historical van-line
business model. Prior to the merger, Clayton, Dubilier & Rice Fund V Limited
Partnership held a majority of the capital stock of both Moveline and SIRVA.
In accordance with the accounting rules for mergers of entities under common
control, our merger with Moveline has been accounted for in a manner similar
to a pooling-of-interests since it was acquired from Clayton, Dubilier &
Rice Fund V Limited Partnership, the controlling shareholder of Moveline and
our parent, SIRVA. Our consolidated financial statements have been restated
to include the combined results of operations, financial position and cash
flows of Moveline since its inception.
As a result of the merger, all material intercompany accounts and
transactions with Moveline have been eliminated in consolidation.
27
<Page>
Operating revenues and net loss previously reported by the separate
companies and the combined amounts presented in the accompanying
Consolidated Statement of Operations are as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
(DOLLARS IN MILLIONS)
Operating Revenues:
North American Van Lines, Inc....................... $ 2,228.8 $ 2,371.9
Moveline, Inc....................................... 26.6 9.0
Eliminations........................................ (6.1) (2.2)
---------- ----------
Combined............................................ $ 2,249.3 $ 2,378.7
========== ==========
Net Loss:
North American Van Lines, Inc....................... $ (2.7) $ (10.3)
Moveline, Inc....................................... (8.2) (6.8)
---------- ----------
Combined.............................................. $ (10.9) $ (17.1)
========== ==========
</Table>
Fees and expenses related to the merger and costs to integrate the combined
companies were expensed in the fourth quarter 2001.
(4) Restructuring and other unusual charges or credits (which are also reflected
as adjustments to EBITDA) have been included in this line item as follows:
(a) in the three months ended March 31, 2002, we recorded $0.7 million of
restructuring credit pertaining to the logistics services' parts centers as
we were able to sublease certain parts centers facilities earlier than
originally estimated; (b) in the three months ended March 31, 2001 we
incurred $0.2 million of restructuring charges relating to our moving and
storage services segment's U.K. branch network and the elimination of
management redundancy within the industrial moving unit (which we refer to
as the "U.K. restructuring"); (c) in the year ended December 31, 2001, we
incurred $4.9 million of restructuring charges, of which $4.3 million
related to exiting the logistics services' parts center business and
associated headcount reductions and $0.6 million relate to the U.K.
restructuring; (d) in the year ended December 31, 2000 we incurred
$4.9 million of restructuring charges consisting of $2.7 million of costs
relating to the U.K. restructuring and $2.2 million of restructuring charges
in connection with implementing Fast Forward (a long-term initiative
designed to improve productivity and profitability targeted as improving
efficiency by eliminating or streamlining work processes and reducing costs
by eliminating redundant equipment, facilities and related headcount);
(e) in the year ended December 25, 1999 we incurred $4.1 million of
restructuring expense for severance related costs, building lease
terminations and losses on the sale of equipment, all related to
implementing Fast Forward and $5.0 million of expense related to a customer
contract termination and related settlement costs; (f) in 1998, the
predecessor incurred incremental compensation of $4.6 million due to
contracts with key executives with incentive provisions to encourage them to
remain with the predecessor until a sale of the business was completed and
(g) in 1997, the predecessor received payment in settlement of an auto
liability insurance coverage dispute which had been in litigation.
(5) Represents the reversal of liabilities attributable to discontinued
operations, from reductions in accrued casualty and workers' compensation
claims based on actuarial valuations.
(6) During 1999, we retired debt resulting in an extraordinary charge of
$3.4 million, net of applicable income tax benefit.
(7) Effective January 1, 2001 we adopted FAS Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") as amended,
which resulted in a change in method of accounting. The cumulative effect of
this accounting change was a loss of $0.5 million ($0.3 million, net of
tax). See "Management's Discussion and Analysis of Financial Condition and
of Operations--Accounting Change."
(8) Total debt consists of long-term debt, current portion of long-term debt,
capital lease obligations, amounts outstanding under the revolving credit
facility forming part of our senior credit facility and other short-term
debt.
28
<Page>
(9) Represents cash outflows to agents to secure long-term contracts.
(10) Includes depreciation expense for property and equipment and amortization
expense for intangible assets and deferred agent contract expenditures.
Excludes amortization expense for deferred debt issuance costs, which are
recorded as part of interest expense.
(11) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations plus fixed charges
less capitalized interest. Fixed charges consist of (i) interest whether
expensed or capitalized, (ii) the amortization of deferred debt issuance
costs and (iii) an allocation of one-third of the rental expense from
operating leases, which management considers to be a reasonable
approximation of the interest factor of operating lease payments. For the
three months ended March 31, 2001, the year ended December 25, 1999 and the
three month period ended March 28, 1998, earnings were insufficient to cover
fixed charges by approximately $4.5 million, $1.1 million and $1.3 million,
respectively.
(12) EBITDA for the historical periods presented is generally calculated in
accordance with the definition of that term given in the senior credit
agreement governing our senior credit facility (including certain allowable
adjustments) and includes Allied's results since November 19, 1999, the date
of completion of the Allied Acquisition. EBITDA is determined by combining
income (loss) from operations, restructuring and other unusual charges,
depreciation and amortization, nonoperating income (loss) and allowable
EBITDA adjustments.
EBITDA, as defined, is calculated as follows:
<Table>
<Caption>
NINE MONTH
THREE MONTH PERIOD FROM
PERIOD FROM MARCH 29,
DECEMBER 28, 1998
1997 (INCEPTION)
YEAR ENDED THROUGH THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 27, MARCH 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1999 2000 2001
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN MILLIONS)
Income (loss) from
operations......... $31.2 $(1.3) $11.5 $(1.1) $ 49.8 $ 53.3
Restructuring and
other unusual
charges............ (5.5) 4.6 -- 9.1 4.9 4.9
Depreciation and
amortization....... 12.5 2.9 22.5 31.2 53.9 48.7
Nonoperating income
(expense).......... -- -- -- -- 0.3 --
EBITDA adjustments... -- -- -- 4.2 21.3 18.1
----- ----- ----- ----- ------ ------
EBITDA............... $38.2 $ 6.2 $34.0 $43.4 $130.2 $125.0
===== ===== ===== ===== ====== ======
<Caption>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2001 2002
------------- -------------
(DOLLARS IN MILLIONS)
Income (loss) from
operations......... $ (4.4) $ 6.2
Restructuring and
other unusual
charges............ 0.2 (0.7)
Depreciation and
amortization....... 12.0 8.6
Nonoperating income
(expense).......... (0.2) 0.4
EBITDA adjustments... 5.2 1.5
------ ------
EBITDA............... $ 12.8 $ 16.0
====== ======
</Table>
EBITDA adjustments have been included in this line item as follows: (a) in
the three months ended March 31, 2002, we incurred $1.5 million of EBITDA
adjustments consisting of $0.4 million of EBITDA losses incurred by
Moveline, permitted under an amendment to the credit agreement governing our
senior credit facility, referred to as "Moveline Related Strategic
Initiatives", $0.6 million of e-commerce spending and $0.5 million for the
development and implementation of new information technology; (b) in the
three months ended March 31, 2001 we incurred $5.2 million of EBITDA
adjustments consisting of $3.8 million of Moveline Related Strategic
Initiatives, $0.3 million of expense related to achieving certain cost
savings through synergies arising as a result of the combination with
Allied, $0.9 million of e-commerce spending and $0.2 million for the
development and implementation of new information technology; (c) in the
year ended December 31, 2001, we incurred
29
<Page>
$18.1 million of EBITDA adjustments, consisting of $11.6 million of Moveline
Related Strategic Initiatives, $3.3 million of e-commerce spending,
$0.3 million of expense related to achieving certain cost savings through
synergies arising as a result of the combination with Allied, $2.2 million
for the development and implementation of new information technology and
$0.7 million for additional expenses pertaining to exiting the parts centers
business; (d) in the year ended December 31, 2000, we incurred
$21.3 million of EBITDA adjustments, consisting of $11.4 million of Moveline
Related Strategic Initiatives, $5.1 million of expense related to achieving
certain cost savings through synergies arising as a result of the
combination with Allied, $3.0 million of special pension termination expense
and $1.8 million of e-commerce spending and (e) in the year ended
December 25, 1999, we incurred $4.2 million of EBITDA adjustments,
consisting primarily of incremental expenses of $3.4 million for
professional services in connection with developing Fast Forward.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations as determined by generally accepted
accounting principles, and our calculation thereof may not be comparable to
that reported by other companies. We believe that it is widely accepted that
EBITDA provides useful information regarding a company's ability to service
and/or incur indebtedness. EBITDA does not take into account a company's
working capital requirements, debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary use.
30
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Our operating revenues are derived from the following business segments:
(1) our van line network, (2) our logistics services and (3) our moving and
storage services. Our operating income and cash flow from operations are
influenced by industry volume and market share as well as selling prices for our
services. Additionally, they are impacted by the availability and cost of
hauling capacity and by a number of significant business, economic and
competitive factors, many of which are not within our control.
Our van line network segment, which is based in North America and operates
under the northAmerican, Allied and Global brand names, provides two types of
relocation services: (1) domestic, which provides residential relocation
services in the United States and Canada through a network of exclusive agents
who provide the sales, packing, loading, transportation, delivery and
warehousing services; and (2) international, which primarily markets to
multi-national companies most often based in the United States and provides or
coordinates relocation services for residential shipments destined to or
originating in foreign countries using our exclusive agent network in North
America and authorized representatives around the world to complete the service
offering.
Our logistics services segment consists of (1) logistics solutions, which
includes finished goods distribution, order fulfillment, project-specific
delivery management and the tracking of products through the supply chain, with
a focus on high-value products; (2) specialized transportation services, which
facilitates the movement of computers, electronics, telecommunications and
medical equipment, trade show exhibition materials, fine art and other products
that require specialized transportation, distribution or delivery solutions; and
(3) European operations, which handles logistics solutions and specialized
transportation of high-value products to and from any major city in the United
Kingdom and Europe.
Our moving and storage services segment operates in the United Kingdom,
Europe, Australia and Asia/Pacific through a network of company-owned branches
that utilize the Pickford or Allied Pickfords brand names among others. This
segment provides complete domestic and international residential relocation
services, including sales, packing, loading, transportation, delivery and
warehousing. The moving and storage services segment also provides records
management and office and industrial relocation services.
Customers of the van line network and moving and storage services segments
include (1) corporate accounts, (2) private transferees and (3) government and
military.
Financial Reporting Release No. 60, which was recently issued by the
Securities and Exchange Commission ("SEC"), requires all registrants to discuss
critical accounting policies or methods used in the preparation of financial
statements. Note 1 to the consolidated financial statements includes a summary
of the significant accounting policies and methods used in the preparation of
our consolidated financial statements. The following is a review of the more
significant accounting policies and methods used by the Company:
REVENUE RECOGNITION: We recognize estimated gross revenue to be invoiced to
the transportation customer and all related transportation expenses on the date
a shipment is delivered or services are completed. The estimate of revenue
remains in a receivable account called Delivered Not Processed ("DNP") until the
customer is invoiced. Concurrent with the DNP estimate, we recognize an accrual
for Purchased Transportation Expenses ("PTE") to account for the estimated costs
of packing services, transportation expenses and other such costs associated
with the service delivery. The estimate for PTE is not reversed until we receive
actual charges.
INSURANCE RESERVES: We estimate costs relating to cargo damage and delay
claims based on actuarial methods and our history of loss data, which
approximates 10 years. Our multiple-line property and
31
<Page>
commercial liability insurance group sets its reserve rates based on a
percentage of earned premium. The percentage is based on historical data, run
rates and actuarial methods.
PENSIONS AND OTHER POSTRETIREMENT BENEFITS: We provide a range of benefits
to our employees and retired employees, including defined benefit retirement
plans, postretirement health care and life insurance benefits and
post-employment benefits (primarily severance). We record annual amounts
relating to these plans based on calculations specified by U.S. GAAP, which
include various actuarial assumptions, such as discount rates, assumed rates of
return, compensation increases, turnover rates and health care cost trend rates.
We review our actuarial assumptions on an annual basis and make modifications to
the assumptions based on current rates and trends when it is deemed appropriate
to do so. As required by U.S. GAAP, the effect of the modifications is generally
recorded or amortized over future periods. We believe that the assumptions
utilized in recording the Company's obligations under our plans, which are
presented in Note 12 to the consolidated financial statements, are reasonable
based on our experience and advice from our actuaries.
INCOME TAXES: We follow Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax laws and tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities due to a change in
tax rates is recognized in income in the period that includes the enactment
date. In addition, the amounts of any future tax benefits are reduced by a
valuation allowance to the extent such benefits are not expected to be realized
on a more likely than not basis.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Some of
the areas where estimation is significant are as follows: (a) DNP is the
estimated revenues associated with shipments delivered or services completed and
not invoiced; (b) PTE is the associated purchased transportation expense that is
estimated corresponding to the DNP revenue; (c) accounts and notes receivable
reserves for doubtful accounts are estimated based on historical write-off data
to establish the uncollectible portion of the receivables; (d) costs relating to
cargo damage and delay claims are estimated based on actuarial methods; and
(e) loss reserves of our insurance subsidiaries are estimated using third party
actuaries to estimate insurance reserves.
RESULTS OF OPERATIONS
Our operating revenues are derived from our van line network, logistics
services and our moving and storage services segments.
Transportation expenses for the van line network are comprised of payments
to:
- owner/operators or agents driven on a predetermined rate schedule to
provide equipment and haul shipments,
- owner/operators or agent crews for services such as packing, crating,
loading and unloading,
- agents for booking (sales activity), estimating and customer service, and
- other third parties such as ocean freight carriers for other
transportation services.
32
<Page>
Transportation expenses for the moving and storage segment are similar to
those of the van line network, except that expenses incurred to provide moving
and storage services are largely in the form of direct labor and equipment
expenses rather than in the form of agent or owner/operator expenses.
Transportation expenses for the logistics services segment are comprised of
the following:
- payments to owner/operators, employee or agent drivers on a predetermined
rate schedule to provide equipment and haul shipments,
- payments to owner/operators, employee or agent crews for services such as
pick-up, delivery and installation,
- facility and equipment costs, including lease expense and labor costs
associated with running the transportation network and our equipment,
- payments to agents for booking (sales activity) and customer service, and
- sub-contracted transportation expenses in providing supply chain
management services.
Operating expenses include our consolidated insurance and claims, bad debt
and general and administrative expenses. Employee compensation and benefits
account for over 50% of general and administrative expense. Other significant
components of general and administrative expenses are communication costs, rent,
supplies and other purchased services.
Our financial statements reflect operations since our acquisition by
Clayton, Dubilier & Rice Fund V Limited Partnership on March 29, 1998 through
December 26, 1998, for the years ended December 25, 1999, December 31, 2000 and
2001 and for the three months ended March 31, 2002. After our acquisition by
Clayton, Dubilier & Rice Fund V Limited Partnership, in accordance with Emerging
Issues Task Force 91-9, "Revenue and Expense Recognition for Freight Services in
Process", we changed our accounting basis and recognize estimated revenue and
direct costs when shipments are delivered. Our predecessor company recognized
estimated revenue and direct costs when shipments were loaded. Management
believes the impact of this difference on reported operating revenues and income
from operations is not material.
The results of operations for the period December 28, 1997 through
March 28, 1998 represents the historical results of operations of our
predecessor under the ownership of Norfolk Southern Corporation prior to the
closing of the Clayton, Dubilier & Rice Fund V Limited Partnership acquisition.
Solely to facilitate comparison and assessment of the trends in the results of
operations, the following presentation of results of operations for the year
ended December 26, 1998 was obtained by combining the historical results of
operations of our predecessor for the period from December 28, 1997 through
March 28, 1998 with our results of operations for the period from March 29, 1998
through December 26, 1998 (the "1998 Period") adjusted for the effects of
purchase accounting as if the transaction had occurred as of December 28, 1997.
Prior to the Allied Acquisition on November 19, 1999, we had operated on a
fiscal calendar ending on the Saturday nearest to December 31 of each year. To
coordinate our accounting calendar with Allied's following the Allied
Acquisition, we recorded the operations of North American Van Lines and its
non-Allied subsidiaries for the last week of December 1999 as January 2000
business. This has resulted in an additional week (the "2000 Additional Week")
in the year ended December 31, 2000, as compared to the year ended December 25,
1999 and the year ended December 31, 2001.
Our financial and operating data for the periods ending after November 19,
1999 include financial and operating data of Allied.
33
<Page>
The following table sets forth the percentage relationship of certain items
to our operating revenues for the periods indicated:
<Table>
<Caption>
THREE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 27, 1998 DECEMBER 25, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
(PERCENT OF REVENUES) 1997 PERIOD 1999 2000 2001 2001 2002
- --------------------- ------------- -------- ------------- ------------- ------------- ------------ ------------
Operating revenues:
Van line network...... 55.1% 52.7% 51.1% 62.2% 61.7% 57.0% 54.9%
Logistics services.... 44.9% 47.3% 45.7% 24.2% 23.6% 27.6% 26.7%
Moving and storage
services............ n/a n/a 3.2% 13.6% 14.7% 15.4% 18.4%
----- ----- ----- ----- ----- ----- -----
Operating revenues...... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Transportation and
operating
expenses............ 97.3% 99.1% 99.3% 97.7% 97.4% 100.9% 98.7%
Restructuring and
other unusual
charges............. (0.6)% 0.4% 0.8% 0.2% 0.2% 0.0% (0.2)%
----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............ 3.3% 0.5% (0.1)% 2.1% 2.4% (0.9)% 1.5%
Interest income
(expense)........... 0.1% (1.6)% (1.9)% (2.8)% (2.8)% (3.1)% (2.9)%
----- ----- ----- ----- ----- ----- -----
Income (loss) before
taxes................. 3.4% (1.1)% (2.0)% (0.7)% (0.4)% (4.0)% (1.4)%
Income tax provision
(benefit)........... 1.3% (0.3)% (0.6)% 0.0% 0.1% (5.0)% (0.6)%
Discontinued operations/
extraordinary charge/
cumulative effect..... 0.3% n/a (0.3)% n/a (0.0)% (0.0)% n/a
----- ----- ----- ----- ----- ----- -----
Net income (loss)....... 2.4% (0.8)% (1.7)% (0.7)% (0.5)% 1.0% (0.8)%
===== ===== ===== ===== ===== ===== =====
Income (loss) from
operations:
Van line network...... 1.6% 0.2% 0.1% 1.0% 1.4% (0.9)% 0.7%
Logistics services.... 1.7% 0.3% (0.3)% 0.2% (0.1)% (0.6)% 0.2%
Moving and storage
services............ n/a n/a 0.1% 0.9% 1.1% 0.6% 0.6%
----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............ 3.3% 0.5% (0.1)% 2.1% 2.4% (0.9)% 1.5%
===== ===== ===== ===== ===== ===== =====
</Table>
34
<Page>
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001.
The following table sets forth certain figures regarding our results of
operations for the three months ended March 31, 2002, compared to the three
months ended March 31, 2001.
<Table>
<Caption>
THREE THREE
MONTHS MONTHS
ENDED ENDED % INCREASE
MARCH 31, MARCH 31, (DECREASE) FROM
2002 2001 PRIOR PERIOD(A)
---------- ---------- ---------------
(DOLLARS IN MILLIONS)
Operating revenues:
Van line network......................................... $235.6 $291.2 (19.1)%
Logistics services....................................... 114.9 140.8 (18.4)%
Moving and storage services.............................. 79.2 78.4 1.0 %
------ ------
Operating revenues......................................... $429.7 $510.4 (15.8)%
====== ======
Gross margin............................................... $ 91.0 $ 98.4 (7.5)%
Operating expenses....................................... 85.5 102.6 (16.7)%
Restructuring............................................ (0.7) 0.2 f
------ ------
Income (loss) from operations.............................. $ 6.2 $ (4.4) f
====== ======
Income (loss) from operations:
Van line network......................................... $ 3.0 $ (4.4) f
Logistics services....................................... 0.9 (2.8) f
Moving and storage services.............................. 2.3 2.8 (17.9)%
------ ------
$ 6.2 $ (4.4) f
====== ======
</Table>
- ------------------------
(a) Percentages are reflected except when greater than 100%, in which case an
"f" for favorable or a "u" for unfavorable is shown.
Shipment counts are a measure of activity commonly used by the
transportation industry. The following table represents shipments handled by the
van line network and logistics services segments. A van line network shipment is
the movement of household goods from the point of origin to the final
destination. Logistics services shipments represent the movement of truckload or
less-than-truckload quantities of products from the point of origin to the final
destination. Our moving and storage services segment, which operates outside of
North America (principally the United Kingdom and Australia), primarily
generates revenues among the following activities: domestic moving,
international moving, business moving services and records management. While
shipments are an indicator of revenue in residential moving, aggregate shipment
counts for our moving and storage services segment are not routinely prepared
and therefore are not provided.
<Table>
<Caption>
NUMBER OF SHIPMENTS
-----------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED % INCREASE
MARCH 31, MARCH 31, (DECREASE) FROM
2002 2001 PRIOR PERIOD
---------- ---------- ---------------
Van line network:
U.S. and Canada.................................... 39,200 48,400 (19.0)%
International...................................... 6,200 9,100 (31.9)%
Special products division.......................... 17,400 17,700 (1.7)%
Logistics services:
Specialized transportation......................... 77,400 87,600 (11.6)%
European operations................................ 93,300 102,000 (8.6)%
</Table>
35
<Page>
OPERATING REVENUES. Operating revenues for the three months ended
March 31, 2002 were $429.7 million, a decrease of $80.7 million compared to the
same period in 2001 primarily as a result of the factors discussed below.
Revenue in the van line network for the three months ended March 31, 2002
decreased $55.6 million as compared to the three months ended March 31, 2001 due
primarily to the general economic slowdown which resulted in lower shipment
activity of approximately 20% and 16% in the Allied and northAmerican lines,
respectively, and in the international unit. The shortfall was partially offset
by higher insurance unit revenues of $1.5 million due to additional product
offerings and an expanded customer base.
Revenue in logistics services decreased $25.9 million in the three months
ended March 31, 2002 as compared to the three months ended March 31, 2001 due
primarily to reduced shipments within specialized transportation and reduced
activity levels in freight forwarding. Also, revenues were $4.9 million lower
than in the three months ending March 31, 2001 as we exited the parts center
business at the end of 2001. These reductions were partially offset by new
volume in logistics solutions due to the addition of new customers and increased
volume with existing customers.
Revenue in moving and storage services increased $0.8 million in the three
months ended March 31, 2002 as compared to the three months ended March 31,
2001. This was primarily due to an increase in Asia Pacific revenue, as Asia
business and the domestic and international moving business in Australia
improved. Records management business also improved for the three months ended
March 31, 2002 as compared to the three months ended March 31, 2001. This was
partially offset by softness in U.K. industrial moving.
GROSS MARGIN. Gross margin for the three months ended March 31, 2002 was
$91.0 million, a decrease of $7.4 million compared to the three months ended
March 31, 2001. The decrease was due primarily to a shipment volume decline due
to the general economic slowdown. The gross margin (as a percentage of sales)
was 21.2% for the three months ended March 31, 2002 and was 19.3% for the three
months ended March 31, 2001. This increase was due primarily to customer mix and
operating and service delivery efficiencies.
OPERATING EXPENSES. Operating expenses for the three months ended
March 31, 2002 were $85.5 million, a decrease of $17.1 million compared to the
three months ended March 31, 2001. The decrease is primarily due to reduced
shipment volume, which resulted in reduced cargo and related claims expense.
General and administrative expenses are lower, as cost containment programs
continue, such as delayering the organization and generally reducing
discretionary expenses. Also, effective January 2002, we adopted Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets", under
which goodwill is no longer amortized but is reviewed at least annually for
impairment. The resultant decrease due to the elimination of goodwill
amortization was $2.8 million. As a percentage of revenue, operating expenses
were 19.9% for the three months ended March 31, 2002, compared to 20.1% for the
three months ended March 31, 2001.
RESTRUCTURING. In the three months ended March 31, 2002, we incurred
$0.7 million of restructuring credit pertaining to the logistics parts centers,
as we were able to sublease certain parts centers facilities earlier than
originally estimated. In the three months ended March 31, 2001, we incurred $0.2
million of costs relating to the U.K. restructuring.
INCOME (LOSS) FROM OPERATIONS. Income from operations for the three months
ended March 31, 2002 was $6.2 million, compared to a loss of $4.4 million for
the same period in 2001 as a result of the factors discussed below.
Income from operations in the van line network for the three months ended
March 31, 2002 as compared to the three months ended March 31, 2001 increased
$7.4 million primarily due to lower cargo claims related expense and reduced
general and administrative expenses. Insurance unit margins were
36
<Page>
higher due to additional product offerings and an expanded customer base. Income
from operations in the van line network for the three months ended March 31,
2002 was also higher than for the three months ended March 31, 2001 due to a
year-over-year FAS 133 derivatives gain of $1.8 million and the expenses
associated with the January 2001 agent convention. These favorable variances
were partially offset by lower Allied and northAmerican lines margins as a
result of the general economic slowdown.
Income from operations in logistics services for the three months ended
March 31, 2002 was $0.9 million, an increase of $3.7 million compared to the
three months ended March 31, 2001 due to lower general and administrative
expenses and the elimination of $0.4 million of goodwill amortization. Also,
there was a credit of $0.7 million in the parts center restructuring reserve.
This was partially offset by lower margins due to the reduction in shipment
volume.
Income from operations for the moving and storage services segment decreased
$0.5 million in the three months ended March 31, 2002 as compared to the three
months ended March 31, 2001. Gross margin was lower due to revenue mix. Also,
the unfavorable variance was attributable to $1.1 million of lower
year-over-gains relating to outstanding foreign currency exchange contracts.
This was partially offset by the elimination of goodwill amortization, which was
$1.1 million in the three months ended March 31, 2001.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
2002 was $12.6 million compared to $15.8 million in the three months ended
March 31, 2001. This decrease is due primarily to lower interest rates.
INCOME TAX BENEFIT. For the three months ended March 31, 2002, the income
tax benefit was $2.7 million based on a pre-tax loss of $6.0 million. For the
three months ended March 31, 2001, the income tax benefit was $25.6 million
based on a pre-tax loss of $20.4 million. Our estimated provision for income
taxes differs from the amount computed by applying the federal and state
statutory rates. This difference is primarily due to (1) the non-deductibility
of certain items expensed for book purposes and (2) limitations that exist on
the availability of certain foreign income tax credits. These items create
taxable income that is greater than income reported for financial statement
purposes.
37
<Page>
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000.
The following table sets forth certain figures regarding our results of
operations for the year ended December 31, 2001, compared to the year ended
December 31, 2000.
<Table>
<Caption>
YEAR YEAR
ENDED ENDED % INCREASE
DECEMBER 31, DECEMBER 31, (DECREASE) FROM
2001 2000 PRIOR PERIOD(A)
------------- ------------- ---------------
(DOLLARS IN MILLIONS)
Operating revenues:
Van line network................................... $1,386.9 $1,478.7 (6.2)%
Logistics services................................. 532.0 576.6 (7.7)%
Moving and storage services........................ 330.4 323.4 2.2 %
-------- --------
Operating revenues................................... $2,249.3 $2,378.7 (5.4)%
======== ========
Gross margin......................................... $ 436.9 $ 446.6 (2.2)%
Operating expenses................................. 378.7 391.9 (3.4)%
Restructuring...................................... 4.9 4.9 0.0%
-------- --------
Income from operations............................... $ 53.3 $ 49.8 7.0 %
======== ========
Income (loss) from operations:
Van line network................................... $ 31.3 $ 23.1 35.5 %
Logistics services................................. (2.5) 4.8 u
Moving and storage services........................ 24.5 21.9 11.9 %
-------- --------
$ 53.3 $ 49.8 7.0 %
======== ========
</Table>
- ------------------------
(a) Percentages are reflected except when greater than 100%, in which case an
"f" for favorable or a "u" for unfavorable is shown.
Shipment counts are a measure of activity commonly used by the
transportation industry. The following table represents shipments handled by the
van line network and logistics services segments. A van line network shipment is
the movement of household goods from the point of origin to the final
destination. Logistics services shipments represent the movement of truckload or
less-than-truckload quantities of products from the point of origin to the final
destination. Our moving and storage services segment, which operates outside of
North America (principally the United Kingdom and Australia), generates revenues
approximately evenly divided among three major activities: domestic moving,
international moving and business moving services. While shipments are an
indicator of revenue in residential moving, aggregate shipment counts for our
moving and storage services segment are not routinely prepared and therefore are
not provided.
<Table>
<Caption>
NUMBER OF SHIPMENTS
-----------------------------
YEAR YEAR
ENDED ENDED % INCREASE
DECEMBER 31, DECEMBER 31, (DECREASE) FROM
2001 2000 PRIOR PERIOD
------------- ------------- ---------------
Van line network:
U.S. and Canada.................................... 238,800 271,200 (11.9)%
International...................................... 34,200 41,600 (17.8)%
Special products division.......................... 65,700 95,100 (30.9)%
Logistics services:
Specialized transportation......................... 328,900 348,400 (5.6)%
European operations................................ 380,300 313,700 21.2 %
</Table>
38
<Page>
OPERATING REVENUES. Operating revenues for the year ended December 31, 2001
were $2,249.3 million, a decrease of $129.4 million compared to the same period
in 2000 primarily as a result of the factors discussed below.
Revenue in the van line network for the year ended December 31, 2001
decreased $91.8 million as compared to the year ended December 31, 2000 due
primarily to the general economic slowdown which resulted in lower shipment
activity in the Allied and northAmerican lines, the international unit and the
special products division. The special products division primarily hauls
specialty products such as medical and fitness equipment and tradeshow-related
items. The northAmerican line revenue is also lower due to the 2000 Additional
Week. These shortfalls were partially offset by increased revenue per shipment
in the Allied and northAmerican lines and higher insurance unit revenues of $4.4
million due to additional product offerings and an expanded customer base. Of
the $20.9 million decrease in the special products division revenue,
$12.5 million was due to the loss of the special products division's largest
agent in late 2000. The agent terminated its relationship with us in order to
serve another van line, due to contract pricing differences. See "Risk
Factors--We may not be able to recruit and retain a sufficient number of agents,
representatives or owner/operators to carry out our growth plans."
Revenue in logistics services decreased $44.6 million in the year ended
December 31, 2001 as compared to the year ended December 31, 2000 due primarily
to the elimination of $14.1 million of revenue associated with the home delivery
business, reduced activity levels totaling $15.6 million of revenue in the parts
center business which reflects the loss of a major customer (we exited the parts
center business at the end of 2001) and lower volume in specialized
transportation, principally due to the general economic slowdown. These
decreases were partially offset by higher solutions volume due to the addition
of new customers and the addition of new business in the European operations.
Revenue in moving and storage services increased $7.0 million in the year
ended December 31, 2001 as compared to the year ended December 31, 2000. This
was primarily due to underlying growth on a local currency basis in records
management, increased volume in the residential moving business in the U.K. and
industrial moving business improvement year-over-year. The Australia unit of
Asia/Pacific also showed improvement due primarily to an increase in
international moving. New Zealand has increased its revenue due to an
acquisition made in late 2000. This was partially offset by an unfavorable
currency impact of $19.8 million. For the year ended December 31, 2001, the
Pound Sterling, the Australian dollar and the Euro were weaker as compared to
the year ended December 31, 2000 by approximately 5%, 11% and 3%, respectively,
when translated into the relatively stronger U.S. Dollar.
GROSS MARGIN. Gross margin for the year ended December 31, 2001 was
$436.9 million, a decrease of $9.7 million compared to the year ended
December 31, 2000. The decrease was due primarily to a shipment volume decline
due to the general economic slowdown. The gross margin (as a percentage of
sales) was 19.4% for the year ended December 31, 2001 and was 18.8% for the year
ended December 31, 2000. This increase was due primarily to customer mix and
operating and service delivery efficiencies.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 2001
were $378.7 million, a decrease of $13.2 million compared to the year ended
December 31, 2000. The decrease is due to reduced shipment volume, which
resulted in reduced cargo and related claims expense. As a percentage of
revenue, operating expenses were 16.8% for the year ended December 31, 2001,
compared to 16.4% for the year ended December 31, 2000. The increase was due
primarily to incremental systems expenses aimed at enhancing applications in our
logistics services segment.
RESTRUCTURING. In the year ended December 31, 2001, we incurred
$4.9 million of restructuring expense, of which $4.3 million relates to the
exiting of the logistics services parts center business and headcount reductions
and $0.6 million relates to the U.K. restructuring. In the year ended
December 31, 2000, we incurred $2.7 million of costs relating to the U.K.
restructuring and $2.2 million of restructuring charges in connection with our
Fast Forward program.
39
<Page>
INCOME (LOSS) FROM OPERATIONS. Income from operations for the year ended
December 31, 2001 was $53.3 million, compared to $49.8 million for the same
period in 2000 as a result of the factors discussed below.
Income from operations in the van line network for the year ended
December 31, 2001 as compared to the year ended December 31, 2000 increased
$8.2 million primarily due to lower cargo claims related expense and reduced bad
debt and depreciation expense. Also, general and administrative expenses were
lower than in the same period in 2000. Insurance unit margins were higher due to
additional product offerings and an expanded customer base. These favorable
variances were partially offset by lower Allied and northAmerican lines margins
as a result of the general economic slowdown, the expenses associated with the
January 2001 agent convention and the margin effect of the 2000 Additional Week
in the northAmerican line.
Loss from operations in logistics services for the year ended December 31,
2001 was $2.5 million, a decrease of $7.3 million compared to the year ended
December 31, 2000 due to lower margins in specialized transportation and in the
parts centers partially offset by improved margins in programs. Also
contributing to the unfavorable performance was $3.3 million of additional
restructuring expense year-over-year consisting of severance and employee
benefit costs, lease and asset impairment costs related to the exiting of the
parts center business and incremental systems expenses aimed at enhancing
solutions applications, partially offset by reduced depreciation expense. The
margin effect of the 2000 Additional Week also contributed to the unfavorable
variance.
Income from operations for the moving and storage services segment increased
$2.6 million in the year ended December 31, 2001 as compared to the year ended
December 31, 2000. Margins were higher, with improvement in Australia and New
Zealand offset by lower margins in the residential moving business in the U.K.
Depreciation expense was lower and there was additional restructuring expense
that occurred in 2000. The 2001 favorable variance in income from operations was
partially offset by an unfavorable currency impact of $1.2 million and lower
year-over-year gains relating to outstanding foreign currency exchange
contracts.
INTEREST EXPENSE. Interest expense for the year ended December 31, 2001 was
$62.0 million compared to $67.3 million in the year ended December 31, 2000.
This decrease is due primarily to lower interest rates. The decrease in interest
expense was partially offset by $3.3 million of interest paid on the purchase
price adjustment. See "Financial Condition--Allied Acquisition and Arbitration
Settlement."
INCOME TAX PROVISION (BENEFIT). For the year ended December 31, 2001, the
income tax provision was $1.9 million based on a pre-tax loss of $8.8 million.
For the year ended December 31, 2000, the income tax benefit was less than
$0.1 million based on a pre-tax loss of $17.1 million. Our estimated provision
for income taxes differs from the amount computed by applying the federal and
state statutory rates. This difference is primarily due to (1) the
non-deductibility of amortization expense associated with certain intangible
assets and (2) limitations that exist on the availability of certain foreign
income tax credits. These items create taxable income that is greater than
income reported for financial statement purposes.
40
<Page>
YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO YEAR ENDED DECEMBER 25, 1999
The following table sets forth certain figures regarding our results of
operations for the year ended December 31, 2000, compared to the year ended
December 25, 1999. The financial and operating data for the years ended
December 31, 2000 and December 25, 1999, includes financial and operating data
of Allied from November 19, 1999, the date of the Allied Acquisition.
<Table>
<Caption>
% INCREASE
YEAR ENDED YEAR ENDED (DECREASE) FROM
DECEMBER 31, 2000 DECEMBER 25, 1999 PRIOR PERIOD(A)
------------------ ------------------ ---------------
(DOLLARS IN MILLIONS)
Operating revenues:
Van line network............................ $1,478.7 $ 593.2 f
Logistics services.......................... 576.6 529.7 8.9%
Moving and storage services................. 323.4 36.9 f
-------- --------
Operating revenues............................ $2,378.7 $1,159.8 f
======== ========
Gross margin.................................. 446.6 240.7 85.5%
Operating expenses.......................... 391.9 232.7 68.4%
Restructuring and other unusual charge...... 4.9 9.1 (46.2)%
-------- --------
Income (loss) from operations................. $ 49.8 $ (1.1) f
======== ========
Income (loss) from operations:
Van line network............................ $ 23.1 $ 1.5 f
Logistics services.......................... 4.8 (3.6) f
Moving and storage services................. 21.9 1.0 f
-------- --------
$ 49.8 $ (1.1) f
======== ========
</Table>
- ------------------------
(a) Percentages are reflected except when greater than 100%, in which case an
"f" for favorable or a "u" for unfavorable is shown.
Shipment counts are a measure of activity commonly used by the
transportation industry. The following table represents shipments handled by the
van line network and logistics services segments. A van line network shipment is
the movement of household goods from the point of origin to the final
destination. Logistics services shipments represent the movement of truckload or
less-than-truckload quantities of products from the point of origin to the final
destination. Our moving and storage services segment, which operates outside of
North America (principally the United Kingdom and Australia), generates revenues
approximately evenly divided among three major activities: domestic moving,
international moving and business moving services. While shipments are an
indicator of revenue in residential moving, aggregate shipment counts for our
moving and storage services segment are not routinely prepared and therefore are
not provided.
<Table>
<Caption>
NUMBER OF SHIPMENTS
--------------------------------------- % INCREASE
YEAR ENDED YEAR ENDED (DECREASE) FROM
DECEMBER 31, 2000 DECEMBER 25, 1999 PRIOR PERIOD(A)
------------------ ------------------ ---------------
Van Line Network:
U.S. and Canada............................. 271,200 107,900 f
International............................... 41,600 28,400 46.5%
Special products division................... 95,100 12,000 f
Logistics Services:
Specialized transportation.................. 348,400 332,200 4.9%
European operations......................... 313,700 337,700 (7.1)%
</Table>
- ------------------------
(a) Percentages are reflected except when greater than 100%, in which case an
"f" for favorable or a "u" for unfavorable is shown.
41
<Page>
OPERATING REVENUES. Operating revenues for the year ended December 31, 2000
were $2,378.7 million, an increase of $1,218.9 million compared to the year
ended December 25, 1999. This increase is due primarily to the Allied
Acquisition. Apart from the impact of the Allied Acquisition, operating revenues
in the van line network were higher than in the year ended December 25, 1999 due
primarily to a stronger domestic household relocation market, primarily in the
first six months of 2000, $20.7 million of revenue resulting from the
acquisition of Global, increased revenue per shipment for domestic household
goods resulting from the impact of the annual tariff increase and the effect of
an industry-wide fuel surcharge, which resulted in $22.2 million of additional
revenue. In times of rising fuel costs, tariff regulations allow for a
supplemental charge to defray higher fuel costs and provide further insurance
against the negative impact of such increases. Although this fuel surcharge
results in a favorable variance to revenue, it is passed on to our drivers, and
has no effect on our absolute margin, but slightly reduces our gross margin as a
percentage of sales. Such fuel surcharge was reinstated by the industry in
December 1999. In addition to the impact of the Allied Acquisition, operating
revenues in logistics services were higher than in the year ended December 25,
1999 due primarily to increased volume with our specialized transportation
customers, as shipments rose 4.9%, additional programs with logistics solutions
clients such as Ericsson, Hitachi Data Systems, Micron and Hewlett Packard and
the impact of fuel surcharges. The inclusion of the Additional Week in our
operating results for the year ended December 31, 2000 also contributed somewhat
to the increase in operating revenues in both the van line network and logistics
services segments.
GROSS MARGIN. Gross margin for the year ended December 31, 2000 was
$446.6 million, an increase of $205.9 million compared to the year ended
December 25, 1999. The increase is due primarily to the Allied Acquisition. The
gross margin (as a percentage of sales) for the year ended December 31, 2000 was
18.8% and was 20.8% for the year ended December 25, 1999. This decrease was due
primarily to an increase in the residential hauling commission paid to our
haulers in the van line network and a decrease in the gross margin in the
logistics services due to the mix impact of certain products offered in the year
ended December 31, 2000 versus the year ended December 25, 1999, partially
offset by higher margins in the moving and storage service business.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 2000
were $391.9 million, an increase of $159.2 million compared to the year ended
December 25, 1999. The increase is due primarily to the Allied Acquisition. As a
percentage of revenue, operating expenses were 16.5% for the year ended
December 31, 2000, compared to 20.1% for the year ended December 25, 1999. This
was primarily due to cost savings from synergies as a result of the combination
with Allied and cost savings from Fast Forward.
RESTRUCTURING AND OTHER UNUSUAL CHARGE. In the year ended December 31,
2000, we incurred $2.7 million of costs relating to the U.K. restructuring and
$2.2 million of restructuring charges in connection with our Fast Forward
program. In the year ended December 25, 1999, we incurred $4.1 million of
restructuring charges relating to the Fast Forward program primarily for
severance related costs and $5.0 million of expense related to a customer
contract termination and related settlement costs.
INCOME (LOSS) FROM OPERATIONS. Income (loss) from operations for the year
ended December 31, 2000 was $49.8 million, compared to a loss of $1.1 million
for the year ended December 25, 1999. This improvement is due primarily to the
Allied Acquisition. Apart from the Allied Acquisition, this increase was
primarily the result of the improved performance of our northAmerican line in
the domestic household goods business of the van line network, the increased
revenues in logistics services as discussed above and the acquisition of Global.
INTEREST EXPENSE. Interest expense for the year ended December 31, 2000 was
$67.3 million compared to $21.4 million in the year ended December 25, 1999.
This increase is due primarily to the additional debt incurred in connection
with the Allied Acquisition.
42
<Page>
INCOME TAX PROVISION (BENEFIT). For the year ended December 31, 2000, the
income tax benefit was less than $0.1 million based on a pre-tax loss of
$17.1 million. The variance from statutory rates is due primarily to the
permanent nature of certain non-deductible intangible assets, which results in
us having a greater taxable income amount for purposes of the provision than it
will show as income (loss) before income taxes in the financial statements. For
the year ended December 25, 1999, the income tax benefit was $6.4 million based
on a pre-tax loss of $23.0 million.
FINANCIAL CONDITION
The SEC recently issued Financial Reporting Release No. 61, which sets forth
the views of the SEC regarding enhanced disclosures relating to liquidity and
capital resources. The information provided below about our cash flows, debt,
credit facilities, capital and operating lease obligations and future
commitments is included here to facilitate a review of our liquidity.
LIQUIDITY AND CAPITAL RESOURCES
We broadly define liquidity as our ability to generate sufficient cash flow
from operating activities to meet our obligations and commitments. In addition,
liquidity includes the ability to obtain appropriate debt and equity financing
and to convert into cash those assets that are no longer required to meet
existing strategic and financial objectives. Therefore, liquidity cannot be
considered separately from capital resources that consist of current or
potentially available funds for use in achieving long-range business objectives
and meeting debt service commitments.
Our short-term and long-term liquidity needs will arise primarily from:
- interest expense, which was $62.0 million in 2001, and is expected to
approximate $59.0 million in 2002 (excluding any indebtedness we may incur
in connection with acquisitions that we expect to make in the second
quarter of 2002);
- principal repayments of debt, which will total $17.0 million in 2002,
$22.0 million in 2003, $21.9 million in 2004, $36.7 million in 2005,
$109.7 million in 2006 and $250.2 million thereafter;
- capital expenditures, which were $48.3 million in 2001, and are expected
to approximate $38.0 million in 2002, and
- working capital requirements as may be needed to support business growth.
The notes mature on December 1, 2009. If we are unable to refinance the
amounts outstanding under the senior credit facilities and the notes when they
become due and payable, we could default on our debt obligations, including our
obligations to make payments on the notes. See "Risk Factors--Risks Relating to
the Notes--We may not have enough cash available to service our indebtedness."
Additionally, the seasonal nature of the moving business results in
increased short-term working capital requirements in the summer months. This
will result in an increase in revolving credit borrowings which are typically
collected and repaid by the late fall. Due to this seasonality, we can operate
with negative working capital due to the turnover of our accounts receivable and
access to our revolving credit facility.
ALLIED ACQUISITION AND ARBITRATION SETTLEMENT. On November 19, 1999, we
completed the acquisition of Allied from Exel plc, formerly NFC plc, which was
accounted for as a purchase. The terms of the acquisition provided for an
adjustment to the purchase price pertaining to the amount of net controllable
assets acquired as of the date of the Allied Acquisition. We were unable to
negotiate the final amount of net controllable assets acquired with Exel, and
therefore, a third party arbitrator was engaged for resolution of that amount in
accordance with the terms of the acquisition agreement.
43
<Page>
On September 12, 2001, the third party arbitrator rendered a binding
determination. The arbitrator determined that the amount of net controllable
assets as of the acquisition date was greater than the amount estimated in the
acquisition agreement by $18.1 million, resulting in an increase of the purchase
price by $18.1 million. Interest expense on the purchase price adjustment of
approximately $3.3 million was paid for the period from the acquisition date to
the date when we made the payment. The acquisition agreement also contained
indemnifications by Exel for certain tax payments made by us on behalf of Exel.
These tax payments plus associated interest totaled approximately $4.0 million
and were deducted from the purchase price adjustment. On October 19, 2001, we
paid approximately $17.4 million to Exel for the net balance owed. The purchase
price adjustment resulted in a net increase to goodwill of approximately
$18.1 million.
DEBT SERVICE. Principal and interest payments under our senior credit
facility and interest payments on the notes represent significant liquidity
requirements for us. As of March 31, 2002, we had $513.4 million of indebtedness
comprised of indebtedness for borrowed money and capital leases, consisting of
- the $150.0 million principal amount of our 13 3/8% senior subordinated
notes,
- $284.6 million outstanding under our term loans (consisting of a
tranche A term loan and a tranche B term loan amounting to $124.7 million
and $159.9 million, respectively),
- $56.6 million outstanding under our $150.0 million revolving credit
facility,
- $20.2 million of capital leases, and
- $2.0 million of other debt.
As a result, we are required to devote a substantial amount of our cash flow to
service this indebtedness. We are required to repay our tranche A term loan in
quarterly principal payments over seven years and our tranche B term loan in
quarterly principal payments over eight years. We are required to repay any
amounts borrowed under the revolving credit facility forming part of our senior
credit facility by the seventh anniversary of the initial borrowings under the
senior credit facility. All borrowings under the senior credit facility bear
interest at floating rates based upon the interest rate option elected by us.
During 2002, 2001 and 2000, additional interest capped at a maximum amount of
0.50% per annum was paid on our 13 3/8% senior subordinated notes in accordance
with the registration rights agreement pertaining to such notes, as a registered
exchange offer for such notes had not yet been consummated.
In connection with the purchase of the relocation services business of
Cooperative Resource Services, Ltd. on May 3, 2002, we borrowed an additional
$50.0 million under the tranche B term loan facility. See "Management's
Discussion and Analysis of Financial Condition and of Operations--Subsequent
Events."
COVENANT RESTRICTIONS. The senior credit facility imposes restrictions on
our ability to make capital expenditures. Additionally, the senior credit
facility, the indenture governing the notes and the agreements governing SIRVA's
senior discount debt limit our ability to incur additional indebtedness. Such
restrictions could limit our ability to
- respond to certain market conditions,
- meet our capital spending program,
- provide for unanticipated capital investments or
- take advantage of business opportunities.
44
<Page>
The covenants in the senior credit facility also, among other things, restrict
our ability to
- dispose of assets,
- incur guarantee obligations,
- prepay other indebtedness,
- make restricted payments,
- create liens,
- make equity or debt investments,
- make acquisitions,
- modify terms of the indenture,
- engage in mergers or consolidations,
- change the business conducted by us,
- make capital expenditures or
- engage in certain transactions with affiliates.
The indenture and the agreements governing SIRVA's senior discount debt contain
a number of similar restrictions.
CAPITAL AND AGENT CONTRACT EXPENDITURES.
Capital expenditures for 2001 were $48.3 million which primarily consisted
of computer equipment, software development and transportation and warehouse
equipment.
During 2001, we entered into various vehicle, trailer and equipment leases
totaling $14.3 million, which are being accounted for as capital leases. The
leases require us to pay customary operating and repair expenses that will keep
these assets in operating and roadworthy condition.
In the van lines network, we commit to certain payments to agents as an
incentive either to convert from a competing van line or to renew or otherwise
enter into long-term contracts with us. Agent contract expenditures in 2001 were
$1.4 million. We anticipate agent contract expenditures to be $3.5 million in
2002.
FINANCING SOURCES. As of March 31, 2002, there was approximately
$77.5 million available under the revolving credit facility forming part of our
senior credit facility to meet our future working capital and other business
needs. We believe that cash generated from operations, which was $111.3 million,
primarily from the collection of accounts receivable for the year ended
December 31, 2001, together with amounts available under the revolving credit
facility and any other available source of liquidity will be adequate to permit
us to meet our debt service obligations, capital expenditure program
requirements, ongoing operating costs and working capital needs for at least the
next twelve months. Our future operating performance and ability to service or
refinance the notes and to repay, extend, or refinance our senior credit
facility will be, among other things, subject to future economic conditions and
to financial, business and other factors, many of which are beyond our control.
We made a $21.9 million prepayment of tranche A and tranche B debt on
March 29, 2002, due to excess cash flow in 2001, as defined in our senior credit
facility. Of that amount, approximately $4.2 million
45
<Page>
replaced principal payments due at that time, with the remaining approximately
$17.7 million reducing future principal payments.
The following table provides a summary, as of December 31, 2001, of our
contractual obligations related to debt, leases and other commercial
commitments:
<Table>
<Caption>
PAYMENTS DUE BY PERIOD
-----------------------------------------
LESS
THAN 1 1-3 4-5 AFTER 5
CONTRACTUAL OBLIGATIONS TOTAL YEAR YEARS YEARS YEARS
- --------------------------------------------------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
Long-Term Debt..................................... $457.4 $ 17.0 $ 43.8 146.4 250.2
Capital Lease Obligations.......................... 20.4 4.0 5.4 7.2 3.8
Operating Leases................................... 233.0 49.4 69.8 44.8 69.0
Unconditional Purchase Obligations................. 9.8 5.2 3.9 0.7 --
------ ------ ------ ------ ------
Total Contractual Cash Obligations................. $720.6 $ 75.6 $122.9 $199.1 $323.0
====== ====== ====== ====== ======
</Table>
In addition, we guarantee operating lines of credit maintained by
wholly-owned foreign subsidiaries. As of December 31, 2001 and 2000, the
outstanding balance was $1.2 million and $1.9 million, respectively.
In connection with the purchase of the relocation services business of
Cooperative Resource Services, Ltd. on May 3, 2002, we borrowed an additional
$50.0 million under our senior credit facility. See "Management's Discussion and
Analysis of Financial Condition and of Operations--Subsequent Events."
OFF BALANCE SHEET ARRANGEMENTS
During 2001, we sold a portion of our equipment notes receivable portfolio
to an unaffiliated third party. The transaction, which qualified as a sale under
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" resulted in
cash proceeds of $6.3 million, which approximated the fair value of notes
receivables sold. The equipment notes receivable are due from agents or
owner-operators for trailers, tractors and straight trucks and are
collateralized by those assets. Each note is generally for a term of five years,
bearing interest at either a fixed or variable rate of prime plus 1.0% - 2.0%.
Principal and interest are payable monthly over the term of the agreement. Under
the terms of the sales agreement, we are responsible for servicing,
administering, and collecting these notes receivable on behalf of the
unaffiliated third party. Servicing fees under the sales agreement are deemed
adequate compensation to us for performing the servicing and, accordingly, no
servicing asset or liability has been recognized in the accompanying financial
statements. Under the terms of the transaction, the maximum recourse exposure to
us was $0.7 million.
RELATED PARTY TRANSACTIONS
We are parties to a consulting agreement with Clayton Dubilier and Rice,
Inc. whereby Clayton Dubilier and Rice, Inc. receives a management fee for
financial advisory and management consulting services. For the three months
ended March 31, 2002 and the years ended December 31, 2001 and 2000 and
December 25, 1999, such fees were $0.125 million, $1.375 million, $0.4 million
and $0.4 million, respectively.
We have guaranteed loans in an aggregate principal amount of $0.5 million
and $0.021 million as of March 31, 2002 and December 31, 2001, respectively, to
various members of management in connection with their investment in our parent,
SIRVA. These loans mature on various dates in 2004 and bear interest at the
prime rate plus 1.0%.
See "Certain Relationships and Related Party Transactions."
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FOREIGN CURRENCY TRANSLATION
The following is a historical discussion of currency translations. The
future magnitude and direction of the adjustments described depends on the
relationship of the U.S. Dollar to other foreign currencies. The effects of
foreign currency fluctuations in our foreign operations are somewhat mitigated
by the fact that the majority of expenses are incurred in the same currency in
which corresponding revenues are generated.
Operating revenues from operations outside of the United States during 2001
amounted to $450.1 million, or 20.0% of our operating revenues. At December 31,
2001, approximately 47.1% of our total long-lived assets were denominated in
currencies other than the U.S. Dollar. The functional currency for our
international subsidiaries is the local currency for the country in which the
subsidiaries own their primary assets. We have operations in several foreign
countries including those that use the Canadian dollar, the British pound
sterling, the Australian dollar or the Euro as their functional currencies.
The translation of the applicable currencies into U.S. Dollars is performed
for balance sheet accounts using current exchange rates in effect at the balance
sheet date and for revenue and expense accounts using a weighted average
exchange rate during the period. The effect of U.S. Dollar currency exchange
rates in Canada, the U.K., Europe, Australia and the other countries in which we
operate produced a net currency translation adjustment loss of $0.80 million,
which was recorded as an adjustment to stockholders' equity as an element of
other comprehensive income, for the three months ended March 31, 2002.
INFLATION
We believe that inflation generally does not have a material effect on the
results of our operations.
SEASONALITY
Our operations are subject to seasonal trends common to the moving industry.
Results of our operations for the quarters ending in December and March are
typically lower than the quarters ending in June and September due to reduced
shipments in the winter months. With respect to the van line network, over half
of the network revenue is typically generated from May through September. For
logistics services, shipping requirements of the customer base result in higher
shipment volumes at the end of each quarter. Moving and storage services
experiences seasonality with respect to residential relocations; however, this
is somewhat diminished by the geographic diversity of our business moving
activities and involvement with other non-seasonal operations such as records
management and office moving.
ACCOUNTING CHANGE
Effective January 1, 2001, we adopted SFAS 133 as amended which resulted in
a change in method of accounting. The cumulative effect of this accounting
change was a loss of $0.5 million ($0.3 million, net of tax). SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivation instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either assets
or liabilities on the balance sheet and the measurement of those instruments at
fair value. Changes in the fair value of derivatives will be recorded in each
period in earnings or accumulated other comprehensive income ("OCI"), depending
upon whether a derivative is designated and is effective as part of a hedge
transaction and, if it is, the type of hedge transaction. If the instrument is
designated as a qualifying hedge transaction and is confirmed to be effective,
the effective portions of the changes in the fair value of the derivative are
recorded in OCI and are recognized in the income statement when the hedged item
affects earnings. Ineffective portions are recognized in earnings. Derivative
gains or losses included in OCI are reclassified into earnings at the time when
the hedged items affect earnings. During the three months ended March 31, 2002,
a loss of $1.1 million was reclassified to interest expense. During the three
months ended March 31, 2002, ineffectiveness related to cash flow hedges was
income of $0.02 million.
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RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142") that supersede Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations", and APB Opinion No. 17,
"Intangible Assets". The two statements modify the method of accounting for
business combinations and address the accounting and reporting for goodwill and
intangible assets. SFAS 141 is effective for all business combinations initiated
after June 30, 2001 and all business combinations accounted for by the purchase
method for which the date of acquisition is after June 30, 2001. The adoption of
SFAS 141 did not have a material effect on our operating results or financial
condition. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001. Beginning in 2002, we no longer amortize goodwill on a
straight-line basis, but instead evaluate goodwill for impairment annually.
Also, amortization of approximately $10.9 million on an annualized basis has
ceased. We completed the goodwill evaluation process and determined there was no
impairment.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), superseding SFAS 121, effective for fiscal years beginning after
December 15, 2001. The provisions of SFAS 144 are for long-lived assets to be
disposed of by sale or otherwise are effective for disposal activities initiated
by an entity's commitment to a plan after the initial date of adoption of
SFAS 144. We are currently assessing the impact of SFAS 144 on our operating
results and financial condition.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including changes in interest rates
and foreign currency exchange rates.
We are exposed to various interest rate risks that arise in the normal
course of business. We finance our operations with borrowings comprised
primarily of variable rate indebtedness. Significant increases in interest rates
could adversely affect our operating margins, results of operations and our
ability to service indebtedness. An increase of 1% in interest rates payable on
our variable rate indebtedness would increase our annual interest rate expense
by approximately $2.5 million.
We utilize interest rate agreements and foreign exchange contracts to manage
interest rate and foreign currency exposures. The principal objective of such
contracts is to minimize the risks and/or costs associated with financial and
international operating activities. We do not utilize financial instruments for
trading purposes. The counterparties to these contractual arrangements are
financial institutions with which we also have other financial relationships. We
are exposed to credit loss in the event of nonperformance by these
counterparties. However, we do not anticipate nonperformance by the other
parties, and no material loss would be expected from their nonperformance.
We had three open interest rate swap agreements as of March 31, 2002. The
intent of these agreements is to reduce interest rate risk by swapping an
unknown variable interest rate for a fixed rate. These agreements qualify for
hedge accounting treatment. Therefore, market rate changes are reported in OCI.
The following is a recap of each agreement.
<Table>
Notional amount......................... $40.0 million $70.0 million $20.0 million
Fixed rate paid......................... 4.91% 5.44% 4.785%
Variable rate received.................. 3 month LIBOR 1 month LIBOR 1 month LIBOR
Expiration date......................... March 2003 December 2002 April 2003
</Table>
Assets, liabilities, and commitments that are to be settled in cash and are
denominated in foreign currencies for transaction purposes are sensitive to
changes in currency exchange rates. All material trade
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receivable balances are denominated in the host currency of the local operation.
For the three months ended March 31, 2002 and 2001, we recognized currency gains
of $0.6 million and $0.2 million, respectively, for transactional related items.
From time to time, we utilize foreign currency forward contracts in the
regular course of business to manage our exposure against foreign currency
fluctuations. The forward contracts establish the exchange rates at which we
will purchase or sell the contracted amount of U.S. Dollars for specified
foreign currencies at a future date. We utilize forward contracts which are
short-term in duration (less than one year). The major currency exposures hedged
by us are the Australian dollar, the British pound sterling and the Euro. The
contract amounts of foreign currency forwards at March 31, 2002 and
December 31, 2001 were $4.0 million and $3.5 million, respectively. A
hypothetical 10% adverse movement in foreign exchange rates applied to our
foreign currency exchange rate sensitive instruments held as of December 31,
2001 would result in a hypothetical loss of approximately $0.35 million. Changes
in fair value relating to these derivatives are recognized in current period
earnings. For the three months ended March 31, 2002 and 2001, we recognized $0
and $1.1 million, respectively, of gains resulting from changes in the fair
value of foreign currency derivatives.
The company holds various convertible bonds in the investment portfolio of
our insurance operations. The value of the conversion feature is bifurcated from
the value of the underlying bond. Changes in fair value are recorded in current
period earnings. For the three months ended March 31, 2002 and 2001, we
recognized $1.4 million of gains and $0.4 million of losses, respectively.
Other assets at March 31, 2002, included marketable equity securities which
are classified as available-for-sale and are recorded at fair value. Unrealized
holding gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component
of other comprehensive income until realized.
RESTRUCTURING AND OTHER UNUSUAL CHARGE
The following summarizes our restructuring and other unusual charge:
- Fast Forward Program
In January 1999, with the help of outside consultants, we initiated the
Fast Forward Program, which was a detailed evaluation of our existing cost
structure. The program was comprised of a number of initiatives, primarily
relating to employee redundancy. The charges included estimated severance
costs for 237 employees across all our operating divisions, outplacement
services and other costs. None of these charges related to the Allied
Acquisition. A total of 188 employees were terminated. During 2000, the
Fast Forward Program was completed, with remaining severance costs paid in
2001.
- Allied Acquisition
Included in the acquisition purchase price allocation were restructuring
charges related to the Allied Acquisition, which reflected certain
severance and relocation costs we incurred to effect a worldwide
integration plan for Allied's operations. A total of 66 employees were
terminated and 55 were relocated. In 2000, based on an evaluation of the
remaining amount needed, a reduction of $1.6 million was made to the
restructuring accrual, which was offset by an adjustment to goodwill.
During 2000, the program was completed with remaining severance costs paid
in 2001.
- Moving and Storage Services--UK Operating Segment
In 2000, our Moving and Storage Services operating segment initiated
programs in its United Kingdom operations in an effort to restructure the
branch system and to eliminate management redundancy within its Pickfords
Vanguard unit, reducing headcount by 93 employees. Charges were
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recorded as branch locations were identified for closure. The
identification process continued through 2001 and headcount was reduced by
an additional 16 employees. The programs were completed in 2001.
- Business Needs Staffing Adjustment
In November 2000, due to business needs as determined by management, we
established a restructuring reserve of $1.1 million whereby headcount was
reduced by 50 employees. The charges included estimated severance costs
across all of our operating divisions. Severance costs were paid out and
the program was completed in 2001.
- Logistics Parts Centers
In June 2001, our Logistics Services operating segment established a
program to exit the Parts Center business. The charges included severance
and employee benefit costs for 293 employees, lease and asset impairment
costs to shut down and exit the Parts Center business by the end of 2001.
Due to lease terms and severance agreements, certain facility lease
payments will continue through September 2005. During the three months
ended March 31, 2002, $0.7 million of restructuring credit occurred when we
were able to sublease certain Parts Center facilities earlier than
originally estimated.
- Other Unusual Charge
In 1999, we incurred expense of $5.0 million related to a customer contract
termination. The settlement agreement provided for reimbursement of costs
for cargo claims, delay claims and other costs associated with customer
service matters. The settlement allowed us to offset customer receivables
against the claim payment otherwise due.
As a result of our various restructuring efforts, we have realized savings
from the elimination of redundant positions, process innovation, terminal and
network efficiencies and other general and administrative savings primarily as a
result of process redesign and productivity.
SUBSEQUENT EVENTS
On April 2, 2002, SIRVA filed a certificate of amendment to its certificate
of incorporation with the State of Delaware authorizing SIRVA to increase the
number of shares of its common stock from 1,800,000 shares to 2,400,000 shares.
On April 12, 2002, we purchased National Association of Independent
Truckers, a leading provider of insurance services to independent contract truck
drivers, for approximately $30.0 million in cash, and a deferred amount of
$3.0 million payable subject to the completion of certain operating performance
objectives during 2002 and 2003. National Association of Independent Truckers is
an association of more than 11,000 independent contract truck drivers that
provides its members with occupational accident, physical damage and
non-trucking liability insurance, as well as access to a suite of professional
services. The purchase price was funded from the sale of investments and
existing cash balances and $20.0 million of cash from the sale of 140,846 shares
of SIRVA common stock to Clayton, Dubilier and Rice Fund VI Limited Partnership,
a Cayman Islands exempted limited partnership managed by Clayton Dubilier and
Rice, Inc., and an affiliate of Clayton, Dubilier & Rice Fund V Limited
Partnership, the controlling shareholder of SIRVA.
On May 3, 2002, SIRVA purchased substantially all the assets of Cooperative
Resource Services, Ltd., a business that provides comprehensive relocation
services to companies and their employees, including home sale services,
relocation logistics services and mortgage lending services. One of our
wholly-owned subsidiaries purchased all of such business' assets other than the
assets relating to certain mortgage lending operations of the seller. The
mortgage lending operations of the seller were purchased by a direct
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wholly-owned subsidiary of SIRVA. Subject to certain adjustments, the combined
cash purchase price for the acquisitions was approximately $60.0 million, of
which $3.5 million was paid for the assets of the mortgage lending operations.
Approximately $45.0 million of the cash purchase price was paid in cash and
$15.0 million was paid in notes issued by us. In addition, certain liabilities
relating to the acquired business were assumed in connection with the
acquisition, including $26.6 million of indebtedness under a revolving credit
facility used to fund the mortgage lending operations, which was assumed by the
SIRVA acquisition subsidiary. The cash purchase price for the acquisition, as
well as approximately $24.1 million of other indebtedness of the acquired
business that was refinanced as part of the acquisition, were financed with the
proceeds of $40.0 million of cash from the sale of 281,691 shares of SIRVA
common stock to Clayton, Dubilier & Rice Fund VI Limited Partnership, and the
incurrence of $50.0 million of additional senior indebtedness.
On June 4, 2002, in connection with the investments made by Clayton,
Dubilier & Rice Fund VI Limited Partnership on April 12 and May 3, 2002 to
finance the acquisitions referred to above, accredited investors who currently
hold shares of SIRVA common stock, including members of management, were offered
the opportunity to purchase, on a pro rata basis, additional shares of SIRVA
common stock. The total number of shares offered to such stockholders was
204,426. The offer is expected to close on or about July 15, 2002.
On June 13, 2002, the SIRVA Board of Directors approved a ten for one split
of SIRVA's common shares, which will be effected by means of a stock dividend of
nine shares of SIRVA common stock for each outstanding share of such stock held
as of July 31, 2002. The stock split is expected to be effected on or about
July 31, 2002. In connection with the stock split, SIRVA intends to file a
certificate of amendment to its certificate of incorporation on or prior to
July 31, 2002 to increase the number of shares of its common stock from
2,400,000 shares to 24,000,000 shares.
On June 13, 2002, the SIRVA Board of Directors approved the SIRVA, Inc.
Directors Compensation Plan, under which members of the Board of Directors of
SIRVA and NAVL who are not employees of SIRVA, NAVL or Clayton, Dubilier and
Rice, Inc. would receive at least 50% of such director's compensation in common
stock of SIRVA and the balance in cash, as elected by the director. The cash
payment and the stock grant will be made quarterly in arrears. The chairman of
each committee who is a director eligible to participate in the Directors
Compensation Plan will continue to receive an additional annual fee of $10,000
in cash. The Directors Compensation Plan has a five year term and 100,000
post-split shares of SIRVA common stock will be available for issuance under the
plan.
The Directors Compensation Plan also permits an eligible director to elect
to receive 50% or more of his or her total compensation in "deferred" shares and
the balance in SIRVA shares, cash or both, if such director so elects prior to
the beginning of the calendar year in which services are to be performed. These
deferred shares represent SIRVA's contractual promise to deliver SIRVA shares
when a participating director's service as a director has terminated.
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BUSINESS
GENERAL
We are a leading global relocation and moving services company and also the
largest logistics services provider among all U.S. van lines. We are a global
network manager of agents, owner/operators and company-owned branches with
locations in 21 countries. Our diversified customer base includes many leading
Fortune 500 and FTSE-100 companies, private transferees and the government and
military of the United States and other countries.
On March 29, 1998, NA Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of our parent, SIRVA, Inc., a Delaware corporation,
formerly known as Allied Worldwide, Inc. and NA Holding Corporation, acquired
(the "1998 Acquisition") all of the capital stock of North American Van Lines
from Norfolk Southern Corporation and J.P. Morgan Ventures Corporation. NA
Acquisition and SIRVA were formed by Clayton, Dubilier & Rice Fund V Limited
Partnership, a Cayman Islands exempted limited partnership, a private investment
fund that is managed by Clayton, Dubilier & Rice, Inc. After the 1998
Acquisition, NA Acquisition was merged with and into North American Van Lines
with North American Van Lines being the surviving corporation and a direct
wholly owned subsidiary of SIRVA.
On November 19, 1999, we completed the Allied Acquisition, acquiring the
Allied/Pickfords businesses from Exel plc, formerly known as NFC plc. The terms
of the Allied Acquisition provided for an adjustment to the purchase price
pertaining to the amount of net controllable assets acquired as of the date of
the Allied Acquisition. We were unable to negotiate the final amount of net
controllable assets acquired with Exel, and therefore, a third party expert was
engaged and the matter has been resolved in accordance with the terms of the
acquisition agreement.
On April 1, 2000, we completed the acquisition of certain assets of Global
Van Lines, including the rights to name, marks, operating authorities and agency
contracts, for $4.2 million. The Global agents are located throughout the U.S.
with a concentration on the West Coast. The acquisition of Global has
strengthened our position in the marketplace and increased our share of the
domestic relocation business and is expected to improve our hauling balance
given growing westward population patterns.
On December 31, 2001, we completed a stock-for-stock merger with Moveline,
Inc., under an agreement and plan of merger dated as of November 9, 2001,
pursuant to which Moveline merged with one of our wholly-owned subsidiaries,
with such subsidiary as the surviving corporation. Under the terms of the merger
agreement, Moveline's stockholders received a fraction of a share of the common
stock of our parent, SIRVA, for each Moveline share acquired in the merger.
Immediately following the merger, we contributed the surviving subsidiary to
Allied Van Lines, Inc., another of our wholly-owned subsidiaries. Allied Van
Lines subsequently merged with that subsidiary with Allied Van Lines as the
surviving corporation. In connection with the stock-for-stock merger, Clayton,
Dubilier & Rice Fund V Limited Partnership acquired 176,057 additional shares of
SIRVA. Prior to the merger, Moveline had developed and marketed a proprietary
information technology-based customer care solution that builds upon the
relocation industry's historical van line business model.
On April 12, 2002, the Company purchased National Association of Independent
Truckers, a leading provider of insurance services to independent contract truck
drivers, for approximately $30 million in cash, and a deferred amount of
$3 million payable subject to the completion of certain operating performance
objectives during 2002 and 2003. National Association of Independent Truckers is
an association of more than 11,000 independent contract truck drivers that
provides its members with occupational accident, physical damage and
non-trucking liability insurance, as well as access to a suite of professional
services. To finance a portion of the purchase price, Clayton, Dubilier and Rice
Fund VI Limited Partnership, a Cayman Islands exempted limited partnership
managed by Clayton, Dubilier and Rice, Inc., and an
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affiliate of Clayton, Dubilier & Rice Fund V Limited Partnership, purchased
140,846 shares of SIRVA common stock.
On May 3, 2002, SIRVA purchased the relocation services business of
Cooperative Resource Services, Ltd. The business provides comprehensive
relocation services to companies and their employees, including home sale
services, relocation logistics services and mortgage lending services. A
wholly-owned subsidiary of North American Van Lines purchased all of such
business' assets other than the assets relating to certain mortgage lending
operations of the seller. The mortgage lending operations of the seller were
purchased by a direct wholly-owned subsidiary of SIRVA. To finance a portion of
the purchase price, Clayton, Dubilier & Rice Fund VI Limited Partnership
purchased an additional 281,691 shares of SIRVA common stock.
BUSINESS SEGMENTS
We are a diversified motor carrier operating under the brand names of
northAmerican, Global Van Lines, Allied Van Lines, Pickfords and Allied
Pickfords; with operations located throughout the United States, Canada,
portions of Europe, the United Kingdom, Australia, New Zealand and other
Asia/Pacific locations. We conduct our U.S. and Canadian operations primarily
through a network of exclusive agents and affiliated representatives on an
international basis. We conduct our other foreign operations primarily through
213 locations, which we own and operate directly, using selected other
affiliated representatives to complete our service offering on a worldwide
basis. We are not dependent on any single or major group of customers or
suppliers for our operating revenues. We organize our operations in three
segments: van line network, logistics services and moving and storage services
("MSS").
VAN LINE NETWORK SEGMENT
Operating under the brand names northAmerican, Allied and Global throughout
the United States and Canada, we provide both domestic and international
residential relocation services. Our van line network business is primarily
conducted through a network of approximately 1,280 exclusive northAmerican,
Allied or Global agent locations in the United States and Canada. Agents are
independently owned local moving companies that provide customers with the local
packing, warehousing and a portion of the hauling required to support household
moves anywhere in the world. We, in turn, provide our agents with a broad range
of services including identification and coordination of hauling capacity,
coordination of shipments, optimization of capacity, sophisticated
transportation and logistics technology, brand management, national advertising
and a variety of other marketing services.
We participate in all lines of the residential relocation interstate
transportation business and have a highly diversified customer base, including
(1) corporate accounts, (2) private transferees, and (3) government and
military.
The northAmerican, Allied and Global agents are the primary sales channels
for most of our business activities, for which they receive commissions, and
market our services locally or as intermediaries with customers. Owner/operators
are independent contractors who own and drive their tractors for us. The
majority of the equipment used in the van line network is owned by our network
of agents and owner/ operators. See "--Agent Network" and "--Owner/Operators."
For domestic moves, we coordinate origin and destination activities through
our agents. For international moves originating in the United States and Canada,
our northAmerican and Global lines act primarily as freight forwarders,
arranging for cross-border transportation services with third-party providers
and subcontracting with non-exclusive representatives for the hauling, delivery
and unpacking required at the destination. With respect to Allied, international
moves are coordinated by Allied's international moving services network. This
network consists of Allied's wholly-owned moving services companies in the major
non-U.S. markets and independent affiliated agents in major U.S. markets. Each
network member is responsible for providing origin and freight-forwarding
services for moves originating
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in its country of operation, as well as coordinating destination services using
network members in the country of delivery. Customers moving either domestically
or internationally contact local agents who obtain shipment details and provide
moving cost estimates. Once a quote turns into a booking, the agents register
the move with us, and we coordinate all parties involved in the move, including
the origination and processing of all documents associated with the transaction.
The van line network segment has historically experienced stable pricing for
its service offerings, although relocation revenues are subject to seasonal
swings and competition from other van lines or service providers for available
shipments.
In April 2000, we merged a captive insurance subsidiary licensed in Indiana,
North American Transport Insurance Company, Inc. into TransGuard Insurance
Company of America, Inc. (an Illinois corporation that is licensed in
forty-three states). This multiple-line property and commercial liability
insurance group insures owner/operators, agents of the Company and various other
parties in the transportation industry against loss from certain risks,
primarily in cargo warehousing, commercial auto physical damage, commercial auto
liability and general liability.
LOGISTICS SERVICES SEGMENT
The logistics services segment provides customized solutions to facilitate
the handling of high-value products that require specialized transport,
distribution and installation such as electronics, telecommunications, medical
equipment and fine art. Many businesses are outsourcing management of all or a
part of their distribution chain, and as a result, third-party logistics
providers, such as us, have become extensively involved in the full range of
customer supply chain functions. Logistics services include order fulfillment,
freight bill auditing and payment, cross-docking, product marking, labeling and
packaging, supply chain and warehouse management, parts return and repair and
the actual physical movement of goods.
Our logistics services segment manages the coordination of complex supply
chain networks, with a focus on high-value products that require specialized
transport and handling such as electronics, telecommunication equipment and
medical equipment. Specifically, we provide our clients with integrated supply
chain management, distribution facilities, turnkey new store equipment
transportation and set up, freight forwarding and product assembly. Our
logistics services segment is organized into three business units:
- logistics solutions, which uses customized information technology to
coordinate a variety of services such as finished goods and emergency
parts distribution, order fulfillment, project-specific delivery
management and the tracing of products through the supply chain;
- specialized transportation; and
- European operations, which handles logistics solutions and specialized
transportation of high-value products to and from any major city in the
United Kingdom and Europe through wholly owned subsidiaries operating
under the trade name midiData.
Logistics services manages the cost efficiency of clients' shipments primarily
through its OnTrac Network, a system that combines logistics tools with 39
distribution centers and agent service points. We have established numerous
ongoing relationships with key corporate logistics clients, including many
Fortune 500 companies with no single customer representing more than 5.0% of our
logistics services revenue in 2001. These customers are located primarily in the
United States, Canada and Europe, with distribution systems that range from
regional to global.
This segment is driven by corporate customers' increasing need for
specialized handling of sophisticated equipment. It has traditionally been
focused largely on the computer and electronics sector, but has recently
experienced increasing growth in the telecommunications and medical equipment
sectors.
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With our fleet of trailers specifically equipped to handle the loading,
unloading and hauling of sensitive, technology based products, we can combine
our physical distribution capabilities with our logistics solutions to provide
our clients with a complete package of distribution management. The specialized
product delivery process is similar to that in relocation services, where
corporate accounts contact local representatives to establish shipment
requirements and we then coordinate the availability of our specially equipped
trailers with the availability of owner/operators who provide the tractor and
perform the hauling.
The logistics services segment has historically experienced stable pricing.
Our revenues are affected by competition from other van lines and from
less-than-truckload and logistics service providers, as well as changes in
business demand for computer, electronics and other specialty products. In 2000,
we also began a comprehensive upgrade of software within the logistics services
segment. We intend to utilize this advanced technology in order to better serve
our existing customer base and to enhance our ability to attract new customers.
MOVING AND STORAGE SERVICES SEGMENT
Our MSS segment provides residential relocation services primarily in the
United Kingdom, Australia and New Zealand by operating local moving branches
which provide similar services as agents perform in the van line network
segment. Unlike the van line network, MSS owns or leases property and vehicle
assets used in its network.
Operating in the United Kingdom under the brand name Pickfords, our MSS
segment, through company-owned branches, deals directly with corporate clients,
private transferees and government departments. In Australia and New Zealand, we
also provide domestic and international relocation services through
company-owned branches operating primarily under the Allied Pickfords brand name
and some smaller brands. In Asia, the network is a combination of company-owned
branches, franchises and preferred agents, with a focus on international, rather
than domestic, relocations.
In addition to its residential relocation services, Pickfords also provides
crating services, storage services and records management which includes, among
other things, the cataloging, storage, retrieval, look-up, destruction and
transportation of customers' records. Pickfords also provides a full range of
office and industrial relocation services involving the transportation of office
furnishings and equipment in connection with the relocation of any aspect of a
business' operations throughout Europe. Similar services are offered by Allied
Pickfords in Australia and New Zealand. Another component of the MSS segment is
contract-engineering services such as moving heavy plant equipment and
installing electrical facilities.
Allied Arthur Pierre, based in Belgium, is a market leader in international
residential relocations in Belgium and Luxembourg and also operates in France.
Our other moving operations in continental Europe include Allied Varekamp, a
market leader in international household relocations in the Netherlands. Allied
also has operations in major cities in Eastern Europe, including Budapest,
Moscow, Prague and Warsaw. We also operate The Baxendale Insurance Company Ltd.
(licensed in Ireland) as part of our MSS segment.
Our MSS segment has also experienced stable pricing historically for its
relocations service offerings in a competitive market for its services, although
relocation revenues are subject to seasonal swings. The industrial moving
business, a niche business within the United Kingdom, however, is experiencing
strong competitive pricing pressures. Because we own or lease our facilities and
equipment, we have some ability to adjust pricing, labor and equipment based on
regional demands.
AGENT NETWORK
In our van line network and logistics services segments, our agents provide
(1) local sales, packing and warehousing, (2) hauling services and distribution
of goods; and (3) direct sales solicitation and customer development. The agents
own the assets associated with operating in their markets (warehouses, tractors,
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trailers and other equipment) and in many instances have contracts with
owner/operators or have hired employee drivers to bring hauling capacity to the
network.
We have established exclusive long-term relationships with an extensive
network of agents in approximately 1,280 locations in the United States and
Canada. Agents typically enter into renewable, multiyear contractual
relationships with us. We recently concluded negotiations with the Allied agents
for a new agency contract, with a term extending to early 2005, which is being
executed by agents currently. There can be no assurance that every Allied agent
will execute such contract. However, we have historically experienced relatively
low agent turnover. Allied agents who have not yet signed the agreement
represent approximately 7.9% of 2001 van line segment revenue. No one agent
constituted more than approximately 4% of the combined revenues of the van line
network and the logistics services segments in 2001. Our agent network in the
van line network and logistics services segments comprised approximately 78% of
2001 revenue in those segments.
OWNER/OPERATORS
Owner/operators are independent contractors with either us or with our
agents. They:
- provide the hauling skills required to transport shipments interstate;
- provide or contract with temporary workers to provide labor required for
servicing the customer;
- provide an element of customer service at the pick-up or delivery point
and
- supply equipment they own to provide hauling services.
The owner/operators enter into contractual agreements with either us directly or
through our agents who set compensation rates and other terms. Owner/operators
do not generate revenue through any sales or marketing efforts. We maintain
approximately 760 company or agent owner/operators for relocation services and
approximately 950 company owner/operators for logistics services. These
owner/operators own or lease their own tractors, but in most cases, pull
company/agent-owned trailers. Owner/operators provide most of the logistics
hauling capacity and supplement the relocation fleet of agent drivers. In
addition to the primary owner/operator contract for transportation, we have also
developed additional programs or services offered to owner/operators that
provide us with additional sources of revenue, including tractor sales and
financing, fleet service maintenance and fuel sales and physical damage
insurance coverage. As we believe is the case in general in the van line
industry, we have had some difficulty in attracting and retaining qualified
owner/operators.
SALES AND MARKETING
Our sales, customer support and marketing department evaluates target
markets and sets a customer-driven sales agenda, ensures the consistency of
customer communication, directs local input via the Corporate Marketing Agent
Advisory Council and provides the ability for agents to locally customize
advertising and sales-support programs.
Our sales force is comprised of experienced agents and product sales
specialists. We provide a broad range of professional sales training programs
and customized sales management training to our agents and employees. We also
support industry association-based training and certification programs such as
the American Moving and Storage Association's Certified Moving Consultant and
Registered International Mover.
Advertising campaigns work in tandem with directory advertising to create
brand awareness in the industry and the market. We advertise primarily on cable
television and through national billboard buys. Advertising targets key customer
segments, as well as owner/operators.
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COMPETITION
The relocation services business is highly competitive and fragmented. With
respect to our van line network, aside from the handful of large van lines, the
industry remains extremely fragmented with many small private players that may
have strong positions in local markets. We compete primarily with other van
lines, truckload carriers and independent contractors and, with respect to
certain aspects of its business, intermodal transportation, railroads and
less-than-truckload carriers. Intermodal transportation (the hauling of truck
trailers or containers on rail cars or ships) has increased in recent years as
reductions in train crew size and the development of new rail technology have
reduced costs of intermodal shipping. Some of our chief competitors in the van
line network are Unigroup (United and Mayflower), Atlas and Bekins. Our quality
and customer service in the moving relocation industry are key drivers in the
mover selection process. We invest much time and effort to provide value-added
services to our customers. This service is exemplified through our history of
on-time delivery, strong safety record, numerous quality recognition awards,
diverse customer base and long-term agent relationships.
The logistics services segment is also highly competitive and fragmented but
is consolidating because of the advantages of global distribution networks,
large vehicle fleets and global information technology systems. In addition,
consolidation is driven by the customers' desire for integrated services, the
high growth in international and cross-border delivery segments and, in Europe,
the deregulation of European delivery markets. Industry participants are
acquiring, merging or forming alliances with partners that can expand global
reach, breadth of services or technological capabilities in order to better
enable those participants to compete in a rapidly changing global environment.
In specialized transportation services, we compete with a broad spectrum of
transportation providers including forwarders, brokers and various logistics
providers. The primary basis of competition is in performance, specifically
within our information technology systems. We offer sophisticated systems
approaches to manage and monitor the flow of goods we are transporting and to
provide attractive logistics solutions services. Both in North America and
Europe, logistics services providers are bundling services to offer
single-source logistics solutions. Some of our primary competitors in supply
chain management services are Ryder Logistics, FedEx Logistics, Menlo Logistics,
Deutsche Post and UPS Logistics. United Van Lines and Uni-Data continue as
formidable competitors in the specialized transportation sector.
Our MSS segment is also extremely fragmented between regional, national and
local companies. Many of these companies may specialize in segments of the
moving market such as international, domestic or office moving. Price is a key
driver in selection of a mover, so there is a need to operate cost effectively
while maintaining high customer service standards. Our chief competitors in the
moving and storage services segment include Crown Relocations, Britannia,
TransEuro, Amertrans, Sterling, Michael Gerson, White & Company and Interdean in
residential relocations, Harrow Green, Edes and Business Moves in office
relocation and Beck & Pollitzer and Ainscough in industrial relocation.
Competition for the freight we transport is based primarily on service,
freight rate, reliability, transit times and scope of operations. In the United
States, competition and the reduction in regulation caused by the Motor Carrier
Act of 1980 has created downward pressure on the logistics industry's pricing
structure.
GOVERNMENT REGULATION
Our operations are subject to various federal, state, local and foreign laws
and regulations that in many instances require permits and licenses. Our U.S.
motor carrier operations, as a common and contract carrier, are regulated by the
Surface Transportation Board (the "STB") which is an independent, three-member
agency within the U.S. Department of Transportation (the "DOT"). The STB has
jurisdiction similar to the former Interstate Commerce Commission (the "ICC")
which includes issues such as rates, tariffs, antitrust immunity and undercharge
and overcharge claims. The DOT, and in particular the Federal Highway Safety
Administration (the "FHWSA") within the DOT, also has jurisdiction over such
matters as safety, the registration of motor carriers, freight forwarders and
brokers, insurance (financial
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responsibility) matters, financial reporting requirements and enforcement of
leasing and loading and unloading practices. In addition to motor carrier
operations, we also conduct domestic operations as a licensed or permitted
freight forwarder and property broker. Many of the licenses and permits that we
hold were issued by the ICC. With respect to interstate motor carrier
operations, the FHWSA is the principal regulator in terms of safety including
issues such as carrier and driver qualification, drug and alcohol testing of
drivers, hours of service requirements and maintenance and qualification of
equipment.
We are an ocean transportation intermediary pursuant to the Shipping Act of
1984, as amended. As such, we hold ocean freight forwarder licenses issued by
the Federal Maritime Commission (the "FMC") and are subject to the FMC bonding
requirements applicable to ocean freight forwarders. We also conduct certain
operations as a non-vessel-operating common carrier ("NVOCC") and are subject to
the regulations relating to FMC tariff filing and bonding requirement bonds, and
under the Shipping Act of 1984, particularly with respect to terms thereof
proscribing rebating practices. The FMC does not currently regulate the level of
our fees in any material respect.
Our U.S. customs brokerage activities are licensed by the United States
Department of the Treasury and are regulated by the United States Customs
Service. We are also subject to similar regulations by the regulatory
authorities of foreign jurisdictions in which we operate.
With respect to U.S. state and Canadian provincial licenses, the permitting
and licensing structure largely parallels the U.S. federal licensing regulatory
structure.
In the United States, NAVL, Allied and Global have been participants in
certain collective activities, including collective rate-making with other motor
carriers pursuant to an exemption from the antitrust laws as currently set forth
in The Motor Carrier Act of 1980. Over the years, the scope of the antitrust
exemption has decreased and there can be no assurance that such exemption from
the antitrust laws will continue in the future. The loss of such exemption could
result in an adverse effect on our operations or financial condition.
In Europe, including the United Kingdom, we hold "O" (operators) licenses,
international transport licenses and certificates of professional competences.
These licenses are approvals from the relevant local authority permitting the
operation of commercial vehicles from specified bases. One of the prerequisites
for these licenses is the employment by the relevant business of individuals who
hold certain certificates of professional competence.
The Baxendale Insurance Company Ltd. and our other insurance subsidiaries
such as TransGuard Insurance Company of America, Inc. are subject to extensive
supervision and regulation by insurance regulators in their respective
jurisdictions, including regulations limiting the transfer of assets, loans, or
the payments of dividends from such insurance subsidiaries to their affiliates,
including us. Such regulation could limit our ability to draw on these insurance
subsidiaries' assets to repay our indebtedness.
Any violation of the laws and regulations discussed above could increase
claims and/or liabilities, including claims for uninsured punitive damages.
Failure to maintain required permits or licenses, or to comply with applicable
regulations, including environmental permits and regulations could subject us to
fines or, in the event of a serious violation, suspension or revocation of
operating authority or criminal penalties. All of these regulatory authorities
have broad powers generally governing activities such as authority to engage in
motor carrier operations, rates and charges and certain mergers, consolidations
and acquisitions. Although compliance with these regulations has not had a
materially adverse effect on our operations or financial condition in the past,
there can be no assurance that such regulations or any changes to such
regulations will not materially adversely impact our operations in the future.
Our international operations are conducted primarily through local branches
owned or leased by various subsidiaries in 21 countries outside the United
States and in a number of additional countries through agents, franchises and
non-exclusive representatives. We are subject to certain customary risks
inherent in carrying on business abroad, including the effect of regulatory and
legal restrictions imposed by
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foreign governments. As discussed above under "--Moving and Storage Services
Segment," our MSS operations are conducted almost exclusively outside of the
United States.
ENVIRONMENTAL MATTERS
Our operations are subject to a range of environmental requirements in the
various foreign, federal, state and local jurisdictions in which we operate. In
particular, because we own or lease or have in the past owned or leased
facilities at which underground storage tanks are located and operated, we are
subject to regulations governing the design, construction and operation of
underground storage tanks and governing releases from these tanks. We have
incurred, and will continue to incur, costs related to our investigation and
cleanup of releases of materials from underground storage tanks, though such
costs are not expected to have a material adverse effect on our financial
position, results of operations or liquidity.
We have been named as a potentially responsible party ("PRP") in several
environmental cleanup proceedings by federal or state authorities or by other
PRPs. The suits are brought under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or other federal or state
statutes. Based on all known information, it is estimated that the settlement
cost of each PRP site would not be materially or significantly larger than the
reserves established. It is possible that additional claims or lawsuits
involving known or unknown environmental matters may arise in the future.
We actively monitor our compliance with various U.S. federal, state and
local environmental regulations and management believes that we are presently in
material compliance with all applicable U.S. federal, state and local
environmental laws and regulations. Underground storage tanks are monitored on a
regular basis by company personnel and pressure tested periodically by qualified
third-party providers. The tanks have leak detection systems for early leak
detection. Our two main fleet services facilities have environmental assessments
on a regular basis. Periodic employee training for proper hazardous material
handling is performed in compliance within the required three-year cycle.
Further, certain employees are trained on proper shipping procedures, covering
DOT and IATA regulations. The majority of expense for such testing and training
is for personnel costs for designated trainers to monitor its compliance with
foreign environmental regulations and we believe that we are presently in
substantial compliance with all applicable foreign environmental laws and
regulations. These compliance costs are included in our results of operations
and are not material.
We can be expected to continue to incur ongoing capital and operating
expenses to maintain compliance with applicable environmental requirements, to
upgrade existing equipment at its facilities and to meet new regulatory
requirements. While it is not possible to predict with certainty future
environmental compliance requirements, management believes that future
expenditures relating to environmental compliance requirements will not
materially adversely affect our financial condition.
As conditions may exist on our properties related to environmental problems
that are latent or undisclosed, there can be no assurance that we will not incur
liabilities or costs, the amount and materiality of which cannot be reliably
estimated at this time. However, based on our assessment of facts and
circumstances now known, management believes it is unlikely that any identified
matters, either individually or in aggregate, will have a material adverse
effect on our financial position, results of operations, or liquidity.
TRADEMARKS
The marks northAmerican-Registered Trademark-, Allied-Registered Trademark-,
Home Touch-Registered Trademark- and Worldtrac-Registered Trademark- are
registered trademarks. Other brand or product names used in this prospectus are
trademarks or registered trademarks of their respective companies.
We have been highly active in seeking protection for numerous marks and
logos relating to the "northAmerican", "Allied", "Global" and "Pickfords"
brands. We have actively contested unauthorized
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use of the "northAmerican", "Global" and "Allied" marks. We have largely been
successful, but in a few exceptional circumstances have tolerated some
third-party use of the mark in transport-related commerce not directly
competitive with our business.
EMPLOYEES
As of March 31, 2002, our workforce comprised approximately 6,800 employees,
of which approximately 2,000 were unionized. We believe our relationships with
our employees are good. The unionized employees consisted of approximately 1,700
employees covered by union agreements in the United Kingdom and approximately
300 employees in Asia, New Zealand and Australia and a small number of U.S.
employees in our logistics services business. We have not experienced any major
work stoppages in the last ten years.
PROPERTIES
We own executive and administrative office space at our headquarters at 5001
U.S. Highway 30 West, Fort Wayne, Indiana, of approximately 385,676 square feet
and operate warehouse space of approximately 211,860 square feet (which is
primarily owned). All the other properties used in our operations consist of
freight forwarding offices, administrative offices and warehouse and
distribution facilities. As of March 31, 2002, we had 283 facilities in 21
countries around the world, 27 of which were owned and 256 of which were leased.
We own or lease major facilities in Naperville, Illinois, Canada and throughout
the United Kingdom, Australia and New Zealand, and own or lease facilities at
significant moving and storage services locations in many countries throughout
the world. The following table sets forth our owned or leased properties by
location.
<Table>
<Caption>
LOCATION OWNED LEASED TOTAL
- -------- -------- -------- --------
United States and Canada............................... 3 66 69
United Kingdom and Europe.............................. 23 109 132
Australia and New Zealand.............................. 1 67 68
Asia (including United Arab Emirates).................. 0 14 14
-- --- ---
Total.................................................. 27 256 283
</Table>
We believe that our office, warehouse and distribution facilities are
generally well maintained and suitable to support our current and planned
business needs.
LEGAL PROCEEDINGS
We are involved from time to time in other routine legal matters incidental
to our business. We believe that the resolution of such matters will not have a
material adverse effect on our financial position or results of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
current directors and officers.
<Table>
<Caption>
NAME AGE POSITION
- ---- -------- ----------------------------------------------------
James W. Rogers........................ 51 Chairman of the Board, President and Chief Executive
Officer
Michael G. Babiarz..................... 36 Director
Edmund M. Carpenter.................... 60 Director
Wesley K. Clark........................ 57 Director
Kevin J. Conway........................ 43 Director
Kenneth E. Homa........................ 54 Director
Joan E. Ryan........................... 46 Director
Richard J. Schnall..................... 32 Director
Carl T. Stocker........................ 58 Director
Michael P. Fergus...................... 49 President, Van Line Network
Ralph A. Ford.......................... 55 Senior Vice President, General Counsel and Secretary
Douglas V. Gathany..................... 46 Vice President, Treasurer
Larry L. Gunther....................... 59 Senior Vice President, Chief Information Officer
Gregory S. Maiers...................... 53 President, Logistics Services
Ronald L. Milewski..................... 51 Senior Vice President, Chief Financial Officer
Kevin D. Pickford...................... 45 Managing Director, MSS Asia Pacific
Peter Schleicher....................... 59 Vice President--European Logistics
Todd W. Schorr......................... 44 Senior Vice President, Human Resources
Dennis M. Thompson..................... 42 Vice President, Corporate Controller
Jacob van Leenen....................... 49 Vice President and Managing Director, AWW
International
Lawrence A. Writt...................... 44 Vice President, Insurance
</Table>
JAMES W. ROGERS is a principal of Clayton, Dubilier & Rice, Inc., a limited
partner of CD&R Associates V Limited Partnership and CD&R Associates VI Limited
Partnership, and a stockholder and director of CD&R Investment Associates II,
Inc. and CD&R Investment Associates VI, Inc. Prior to joining Clayton,
Dubilier & Rice, Inc. in 1998, Mr. Rogers was a Senior Vice President and a
member of the Corporate Executive Council of General Electric Company. From 1995
to 1998, Mr. Rogers was President and Chief Executive Officer of GE Industrial
Control Systems. Mr. Rogers has an undergraduate degree in economics from
Rutgers College. Mr. Rogers serves as the Chairman of the Board and is a
Director of our company. Mr. Rogers has served as President and Chief Executive
Officer since April 2, 2001.
MICHAEL G. BABIARZ is a principal of Clayton, Dubilier & Rice, Inc., a
limited partner of CD&R Associates V Limited Partnership and CD&R Associates VI
Limited Partnership, and a stockholder and director of CD&R Investment
Associates II, Inc. and CD&R Investment Associates VI, Inc. Prior to joining
Clayton, Dubilier & Rice, Inc. in 1990, he worked in mergers and acquisitions at
Drexel Burnham Lambert Incorporated. Mr. Babiarz serves as a director of RACI
Holding, Inc., Remington Arms Company, Inc. and Fairchild Dornier Corporation.
He holds a Bachelor of Science in Economics from the University of
Pennsylvania's Wharton School. Mr. Babiarz serves as a Director of our company.
EDMUND M. CARPENTER is President and Chief Executive Officer of Barnes
Group Inc. and is a former professional employee of Clayton, Dubilier &
Rice, Inc. Mr. Carpenter is also a director of Campbell Soup Company, Dana
Corporation, Texaco Inc. and The Business Council. From 1988 to 1995,
Mr. Carpenter was Chairman and Chief Executive Officer of General Signal
Corporation. Prior to 1998, Mr. Carpenter
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served as President and Chief Operating Officer of ITT Corporation.
Mr. Carpenter has also served as president of the Automotive Truck Group at
Kelsey Hayes Company and President of Freuhauf de Brazil. Mr. Carpenter attended
the University of Michigan, where he earned both a Bachelor of Science in
Economics and a Masters of Business Administration. Mr. Carpenter serves as a
Director of our company.
GENERAL WESLEY K. CLARK became a Director of our company in May 2001. Prior
to his retirement from the United States military, General Clark served as the
Commander in Chief of the United States European Command and was also the
Supreme Allied Commander Europe from 1997 to 2000. He graduated from the United
States Military Academy at West Point and holds a master's degree in Philosophy,
Politics and Economics from Oxford University. He graduated from the National
War College, Command and General Staff College, Armor Officer Advanced and Basic
Courses, and Ranger and Airborne schools. General Clark was a White House Fellow
in 1975-1976 and served as a Special Assistant to the Director of the Office of
Management and Budget. He has also served as an instructor and later Assistant
Professor of Social Science at the United States Military Academy.
KEVIN J. CONWAY is a principal of Clayton, Dubilier & Rice, Inc., a director
and stockholder of CD&R Investment Associates II, Inc. and CD&R Investment
Associates VI, Inc. and a limited partner of CD&R Associates V Limited
Partnership and CD&R Associates VI Limited Partnership. Mr. Conway is also a
Vice President and the Secretary of CD&R Investment Associates II, Inc. and CD&R
Investment Associates VI, Inc. Mr. Conway is also a director of the Riverwood
International Corporation and Covansys. Prior to joining Clayton, Dubilier &
Rice, Inc. in 1994, he spent ten years with Goldman, Sachs & Co., where he was
elected a partner. He was a senior member of the Mergers & Acquisitions
Department at Goldman, Sachs & Co. and served as the Chief of Staff of the
Investment Banking Division. Mr. Conway is a graduate of Amherst College,
Columbia University School of Business and Columbia Law School. Mr. Conway
serves as a Director of our company.
KENNETH E. HOMA is currently on the faculty of Georgetown University,
McDonough School of Business where he teaches graduate courses in marketing, new
product development and operations. Prior to joining Georgetown in 1996,
Mr. Homa was a consultant with McKinsey & Company and held various executive and
management positions with Black & Decker and General Electric. Mr. Homa has an
undergraduate degree in economics from Princeton University and a M.B.A. from
the University of Chicago, where he was a lecturer in marketing and strategic
planning. Mr. Homa serves as a Director of our company.
JOAN E. RYAN is Executive Vice President and Chief Financial Officer of
Tellabs, Inc. Prior to joining Tellabs in February 2000, Ms. Ryan served as Vice
President, Corporate Controller and as Senior Vice President and Chief Financial
Officer of Alliant Foodservice, Inc. from 1998 to 2000. Ms. Ryan served as Vice
President of Finance and Chief Financial Officer of Ameritech Small Business
Services from 1995 to 1998. Ms. Ryan began her career in 1978 with Price
Waterhouse and Company and held various leadership and management positions at
Baxter Healthcare Corporation, Kewaunee Scientific Corporation and the
Nutrasweet Company. Ms. Ryan holds a bachelor's degree in accounting from the
University of Illinois, Champaign-Urbana and is a certified public accountant.
Ms. Ryan serves as a Director of our company.
RICHARD J. SCHNALL is a principal of Clayton, Dubilier & Rice, Inc. Prior to
joining Clayton, Dubilier & Rice, Inc. in 1996, he worked in the Investment
Banking division of Donaldson, Lufkin & Jenrette, Inc. and Smith Barney & Co. He
also worked for McKinsey and Company. Mr. Schnall serves as a director of
Acterna Corporation and Schulte GmBH & Co. KG. Mr. Schnall is a graduate of the
Wharton School of Business and Harvard Business School. He is a limited partner
of CD&R Associates V Limited Partnership and CD&R Associates VI Limited
Partnership, and a director and stockholder of CD&R Investment Associates II,
Inc. and CD&R Investment Associates VI, Inc. Mr. Schnall serves as a Director of
our company.
CARL T. STOCKER has owned and managed his own acquisition, investment, and
consulting company since 1996. Prior to that time, he served as Chief Financial
Officer of General Electric's Industrial Systems Business from 1990 to 1996 and
Chief Information Officer from 1992 to 1996. He was a member of
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General Electric's Corporate Finance and Information Technology Councils. He has
also served as a senior integration leader for the Space Systems Division
created by General Electric's acquisition of RCA. Mr. Stocker graduated from
Wright State University in 1970 after serving with the U.S. Army. Mr. Stocker
serves as a Director of our company and as the Chairman of the Audit Committee
of the Board.
MICHAEL P. FERGUS serves as President of Van Line Network. Mr. Fergus has
been President and Chief Executive Officer of Allied Van Lines since 1995.
Mr. Fergus joined Allied in 1973 and held various management positions in the
company including Vice President, Allied International; Senior Vice President,
Operations, and Chief Operating Officer. Mr. Fergus holds a Bachelor of Science
in communications from Southern Illinois University and is a member of the World
Trade Club.
RALPH A. FORD joined us in 1999 and serves as Senior Vice President, General
Counsel and Secretary. Previously, Mr. Ford served 18 years in the General
Electric legal department, most recently as General Counsel to GE Industrial
Control Systems. Prior to that, Mr. Ford served as group counsel for Bell &
Howell Company and as an attorney for E.I. duPont deNemours & Co. Mr. Ford
earned a Bachelor of Arts from Morgan State College and a Juris Doctor from
Boston University Law School.
DOUGLES V. GATHANY joined us in June 2001 and currently serves as Vice
President, Treasurer. Prior to joining us, Mr. Gathany served in various
positions with Montgomery Ward since 1979, including as Vice
President-Treasurer. He received a Masters of Business Administration in Finance
from The University of Chicago and a B.A. from Colby College.
LARRY L. GUNTHER joined us in March of 2000 and currently serves as Senior
Vice President and Chief Information Officer for SIRVA. Mr. Gunther came to us
from Boise Cascade Office Products where he served as Chief Information Officer
and vice president since 1997. Prior to that, he was Chief Information Officer
with Gillette for the United States, Canada and Europe. He received his Bachelor
of Science degree from Brigham Young University and his Masters of Business
Administration from Rockhurst University.
GREGORY S. MAIERS has served as President, Logistics Services since
September, 2001. Previously, he held a number of management leadership positions
with North American Van Lines from 1985 through 2000. Prior to that he spent
approximately 10 years in the freight industry with a variety of other
businesses. He received a Masters of Business Administration in transportation
and logistics from Michigan State University and a Bachelor of Science in
marketing and economics from Eastern Michigan University.
RONALD L. MILEWSKI joined us in 1990 as Vice President Finance and serves as
Senior Vice President and Chief Financial Officer. Previously, Mr. Milewski
served as Group Controller at Johnson Controls from 1985 to 1990 and Assistant
Controller for Hoover Universal from 1979 to 1985. Mr. Milewski holds a Bachelor
of Business Administration in accounting from Eastern Michigan University and is
a Certified Public Accountant. He is a member of the American Institute of
Certified Public Accountants and the American Moving and Storage Association and
the ATA Technical Councils.
KEVIN D. PICKFORD serves as Managing Director, Moving & Storage Asia
Pacific. Mr. Pickford joined NFC plc in 1978 and has held a variety of senior
management roles. From 1997 until the Allied Acquisition, he was Managing
Director for NFC's Asia Pacific Moving Services. Prior to this, he was Managing
Director for Allied Pickfords P/L with responsibility for Australian and New
Zealand operations. Mr. Pickford is a graduate and Fellow of the Chartered
Association of Certified Accountants and additionally holds membership in the
Australian Institute of Company Directors.
PETER SCHLEICHER joined us in 1986 and currently serves as Vice President,
European Logistics. Prior to that, Mr. Schleicher was President for Global
International Forwarding and held various executive management positions
overseas with Global Van Lines. Mr. Schleicher graduated from the Willy-Hellpach
College of Technology in Heidelberg and has a degree in forwarding/logistics.
TODD W. SCHORR serves as Senior Vice President, Human Resources and joined
us in June 2000. Mr. Schorr has over 18 years of broad functional experience and
proven leadership in the Human
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Resources area at Pepsi Co. and Cummins Inc. From 1984 until he joined us, he
served at Cummins as Group Director of International Human Resources, with
functional responsibility for operations in India, China, UK, Korea, Japan,
Brazil, Mexico, and Australia. Mr. Schorr holds a Bachelor of Science degree
from Indiana University, and a Masters degree with specialization in Labor
Relations and Labor Law from Indiana University.
DENNIS M. THOMPSON joined us in 1986 and currently serves as Vice President,
Corporate Controller. Prior to joining us, he held various management positions
with Schneider National. Mr. Thompson received his Bachelor of Science degree in
accounting and his Masters of Business Administration from Indiana University
and is a Certified Public Accountant.
JACOB VAN LEENEN serves as Vice President and Managing Director for AWW
International. Mr. van Leenen joined us in 1998 as President for the Canadian
moving businesses. Prior to joining us, Mr. van Leenen served as Vice President
of Operations for GE Capital in Europe and Vice President and General Manager
for GE Capital in Canada from 1991 to 1998. Mr. van Leenen successfully
completed several GE Leadership courses.
LAWRENCE A. WRITT serves as Vice President, Insurance. Mr. Writt joined
Allied Van Lines in 1979 and since 1991 has been President and Chief Executive
Officer of TransGuard Insurance Company of America, Inc. and Vanguard Insurance
Agency, Inc., both wholly owned subsidiaries of Allied Van Lines. Mr. Writt is
also a director of both TransGuard and Vanguard. Mr. Writt has a Bachelor of
Science in economics and accounting from St. Joseph's College.
COMPOSITION OF BOARD AND COMMITTEES
The business and affairs of North American Van Lines are managed under the
direction of its Board of Directors. Each of the directors of North American Van
Lines is also a director of SIRVA (the holder of all of North American Van
Lines' outstanding common stock). The Board is currently composed of eight
directors, none of whom, with the exception of Mr. Rogers, are officers of SIRVA
or North American Van Lines. No director who is (1) an officer or employee of
Clayton, Dubilier & Rice, Inc. at any time that Clayton, Dubilier & Rice, Inc.
is providing consulting services to North American Van Lines or (2) an officer
of North American Van Lines, is entitled to receive any compensation for his
services as a director (although he may be reimbursed his reasonable expenses in
connection with such service). Each director may hold office until his successor
has been duly elected and qualified, or until his earlier death, resignation or
removal.
The North American Van Lines Board has established the following committees:
EXECUTIVE COMMITTEE
The Executive Committee may, in the intervals between meetings of the Board,
exercise the powers and authority of the Board in the management of the
property, affairs and business of North American Van Lines.
The Executive Committee currently consists of James W. Rogers (Chairman) and
Kevin J. Conway.
COMPENSATION COMMITTEE
The Compensation Committee makes recommendations to the Board regarding
salaries and any supplemental employee compensation of the executive officers
and acts upon management's recommendations for salary and supplemental
compensation for all other employees. The Compensation Committee also acts upon
management's recommendations which require director action with respect to all
employee pension and welfare benefit plans. The Compensation Committee currently
consists of Kenneth E. Homa (Chairman), Edmund M. Carpenter, Richard J. Schnall,
and General Wesley K. Clark.
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AUDIT COMMITTEE
The Audit Committee recommends to the Board the firm of independent
certified public accountants to annually audit the books and records of North
American Van Lines. The Audit Committee reviews and reports on the activities of
the independent certified public accountants to the Board and reviews and
advises the Board as to the adequacy of North American Van Lines' system of
internal accounting controls. The Audit Committee adopted a written charter in
2000, which was approved by the Board on March 8, 2001. The Audit Committee
currently consists of Carl T. Stocker (Chairman), Michael G. Babiarz and
Joan E. Ryan.
OTHER COMMITTEES
The Board may form such other committees of the Board as it deems
appropriate.
COMPENSATION OF DIRECTORS
Members of the North American Van Lines Board and of the SIRVA Board who are
not employees of North American Van Lines, SIRVA or Clayton, Dubilier & Rice,
Inc. receive an annual retainer fee of $40,000. An additional annual fee of
$10,000 is paid to the chairman of each committee who is not an employee of
North American Van Lines, SIRVA or Clayton, Dubilier & Rice, Inc. Members of the
SIRVA Board do not receive any additional compensation for their services in
such capacity. All directors are reimbursed for reasonable travel and lodging
expenses incurred to attend meetings.
On June 13, 2002, the SIRVA Board of Directors approved the SIRVA, Inc.
Directors Compensation Plan, under which members of the Board of Directors of
SIRVA and NAVL who are not employees of SIRVA, NAVL or Clayton, Dubilier and
Rice, Inc. would receive at least 50% of such director's compensation in common
stock of SIRVA and the balance in cash, as elected by the director. The cash
payment and the stock grant will be made quarterly in arrears. The chairman of
each committee who is a director eligible to participate in the Directors
Compensation Plan will continue to receive an additional annual fee of $10,000
in cash. The Directors Compensation Plan has a five year term and 100,000
post-split shares of SIRVA common stock will be available for issuance under the
plan. See "Management's Discussion and Analysis--Subsequent Events" for a
discussion of the proposed ten-for-one stock split of shares of SIRVA common
stock.
The Directors Compensation Plan also permits an eligible director to elect
to receive 50% or more of his or her total compensation in "deferred" shares and
the balance in SIRVA shares, cash or both, if such director so elects prior to
the beginning of the calendar year in which services are to be performed. These
deferred shares represent SIRVA's contractual promise to deliver SIRVA shares
when a participating director's service as a director has terminated.
EXECUTIVE COMPENSATION
The following table describes the compensation paid to (1) the current and
former Chief Executive Officers for services rendered during the fiscal year
ended December 31, 2001, and (2) the five other most
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highly compensated executive officers for services rendered during the fiscal
year ended December 31, 2001 (collectively, the "Named Executives").
<Table>
<Caption>
LONG-TERM
COMPENSATION AWARDS
-------------------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OTHER ANNUAL OPTION COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($)(4) ($) COMPENSATION ($)(5) (#)(6) ($)(7)
- ------------------------- -------- -------- -------- ------------------- ---------- ------------
Jeffrey P. Gannon(1)
Director, President,
Chief Executive Officer........ 2001 $163,502 -- $ 2,704 -- $355,774
James W. Rogers(2)
Chairman of the Board,
President and Chief Executive
Officer...................... 2001 -- -- -- -- --
Michael P. Fergus
President, Van Line Network.... 2001 $294,219 18,000 $ 5,538 2,000 $ 29,692
Richard H. Bogan(3)
President, Logistics
Services..................... 2001 $113,846 79,231 $ 6,169 -- $ 85,385
Ronald L. Milewski
Senior Vice President,
Chief Financial Officer........ 2001 $202,154 -- $10,965 1,000 $ 55,746
Larry L. Gunther
Senior Vice President,
Chief Information Officer...... 2001 $245,192 -- $ 3,542 -- $ 12,778
Ralph A. Ford
Senior Vice President,
General Counsel and
Secretary.................... 2001 $231,231 -- $ 2,179 500 $ 2,730
</Table>
- ------------------------
(1) Mr. Gannon became President and Chief Executive Officer on January 5, 2000.
Mr. Gannon resigned as Director, President and Chief Executive Officer
effective April 2, 2001. Upon his resignation, all of Mr. Gannon's options
were cancelled without payment. See "Separation Agreement with Jeffrey P.
Gannon."
(2) Mr. Rogers was elected President and Chief Executive Officer upon
Mr. Gannon's resignation on April 2, 2001. Mr. Rogers is a principal of
Clayton, Dubilier & Rice, Inc., a limited partner of CD&R Associates Fund V
Limited Partnership and of CD&R Associates Fund VI Limited Partnership and a
stockholder and director of CD&R Investment Associates II, Inc. and CD&R
Investment Associates VI, Inc. Mr. Rogers receives no compensation for his
services as President and Chief Executive Officer. Mr. Rogers also serves as
Chairman of the Board.
(3) Mr. Bogan became President, Logistics Services on January 15, 2001. He
resigned from his position on September 4, 2001. See "--Separation Agreement
with Richard H. Bogan."
(4) Amounts in this column include all amounts contributed by the Named
Executives to the North American Van Lines, Inc. Savings Plan and Trust or
the Allied Van Lines, Inc. Profit Sharing and Retirement on Savings Plan,
whichever is applicable to the Named Executives, both of which are qualified
under section 401(k) of the Internal Revenue Code of 1986, as amended.
(5) The company provides certain perquisites to the Named Executives (namely, a
car allowance and, in certain cases, club membership fees), in each case in
an amount less than the amount required to be disclosed. The amounts
disclosed are amounts reimbursement to the Named Executives for the payment
of income taxes due in connection with the receipt of such perquisites.
(6) All options are held under the SIRVA Stock Incentive Plan.
(7) Amounts in this column include (i) severance payments made to Mr. Gannon
($355,774) and Mr. Bogan ($85,385); (ii) amounts contributed by SIRVA to the
Allied Van Lines, Inc. Profit Sharing and Retirement Savings Plan and the
Allied Van Lines, Inc. Executive Retirement Savings Plan on
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behalf of Mr. Fergus ($20,022) and Mr. Gunther ($12,778); (iii) the payment
by SIRVA of relocation expenses for Mr. Milewski ($55,746) and Mr. Ford
($2,730) taking into account the taxable nature of providing such a benefit
and (iv) the payment by SIRVA of premiums on a split-dollar life insurance
policy for Mr. Fergus ($9,670).
STOCK OPTION GRANTS AND VALUES AS OF MAY 20, 2002
The following table sets forth information regarding grants of options to
purchase shares of SIRVA common stock and the value of such options as of
May 20, 2002. Such options were granted to the executive officers listed in the
Summary Compensation Table pursuant to the SIRVA, Inc. Stock Incentive Plan
(described below).
AGGREGATED OPTION EXERCISES IN 2001
AND MAY 20, 2002 OPTION VALUE
<Table>
<Caption>
VALUE OF
UNEXERCISED IN-
NUMBER OF SECURITIES THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL FISCAL YEAR-END
YEAR-END(#) ($)
SHARES ---------------------- ---------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ---------------------- ---------------
Jeffrey P. Gannon(1).................... -- -- 0 shares/ $ 0/0
0 shares
James W. Rogers......................... -- -- 0 shares/ $ 0/0
0 shares
Michael P. Fergus....................... -- -- 2,738 shares/ $ 0/0
7,262 shares
Larry L. Gunther........................ -- -- 0 shares/ $ 0/0
0 shares
Ralph A. Ford........................... -- -- 2,225 shares/ $ 0/0
4,775 shares
Ronald L. Milewski...................... -- -- 4,429 shares/ $186,018/
2,571 shares 65,982
Richard H. Bogan........................ -- -- 0 shares/ $ 0/0
0 shares
</Table>
- --------------------------
(1) Upon his resignation, all of Mr. Gannon's options were cancelled without
payment. See "--Separation Agreement with Jeffrey P. Gannon."
SIRVA, INC. STOCK INCENTIVE PLAN
GENERAL
The SIRVA Board administers the SIRVA, Inc. Stock Incentive Plan. Under this
plan the SIRVA Board may grant rights to purchase shares of SIRVA common stock
and options to purchase shares of SIRVA common stock to executives, officers and
other key employees and agents and consultants of SIRVA selected by the Board.
The SIRVA Board may delegate the authority to administer the plan to a duly
constituted committee of the SIRVA Board.
A maximum of 300,000 shares may be issued under the plan. Of those shares,
up to 100,000 shares of common stock are permitted to be sold to management and
up to 200,000 options may be granted. The options allow participants to purchase
shares of SIRVA common stock. Options granted under the plan that are canceled
without having been exercised may be reissued under the plan. As of May 20,
2002, 35,720 shares and 81,307 options were outstanding under the plan.
SHARES
Under the stock incentive plan, participants may be offered the right to
purchase shares of SIRVA common stock. The purchase price of the shares will
equal the fair market value of SIRVA common stock
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on the date of the offer. If a participant chooses to purchase shares, such
participant must agree not to sell or otherwise dispose of the shares purchased
under the stock incentive plan, except in compliance with the Securities Act and
the subscription agreement entered into between SIRVA and such participant.
Under the subscription agreement, participants are not permitted to transfer
shares purchased at any time before an underwritten public offering of SIRVA
common stock, which is led by at least one underwriter of nationally recognized
standing except under limited circumstances. Clayton, Dubilier & Rice Fund V
Limited Partnership is the only stockholder that currently has the right to
initiate a public offering by itself. In addition, any sale or other disposition
must also be made in compliance with any applicable state and foreign securities
laws. Further, if SIRVA files a registration statement under the Securities Act
with respect to an underwritten public offering of the common stock,
participants may not sell or distribute any shares of common stock to the public
during the 20 days before and the 180 days after the effective date of the
registration statement, other than as part of the public offering. The
restrictions on transfer will not continue following a public offering of the
common stock.
OPTIONS
Under the stock incentive plan, two types of options may be granted: service
options and performance options. Service options become vested and exercisable
in equal annual installments on each of the first five anniversaries of the
grant date. Performance options generally become vested and exercisable upon
achievement of specified cumulative EBITDA targets, except that, to the extent
not vested sooner, they become vested on the ninth anniversary of the grant
date. In addition, the SIRVA Board may accelerate the exercisability of any
option at any time and from time to time. All options granted expire after ten
years from the grant date. In connection with offerings of common stock to
participants under the plan that took place prior to December 31, 2001, the
Company granted two options for each share of SIRVA common stock purchased: one
service option and one performance option. In future offerings, the Company
expects to grant two service options for each share of SIRVA common stock
purchased. In such case, no performance options will be granted.
The exercise price of the options will equal the fair market value of SIRVA
common stock at the date of the grant. Fair market value is determined by the
Board based on an independent appraisal using various financial methodologies.
Grantees who choose to exercise their options must pay all applicable taxes,
which are due upon exercise before shares may be granted. To exercise an option,
a holder may pay the exercise price in full in cash or cash equivalents,
including by personal check, at the time of exercise. The exercise price of any
options exercised at any time following a public offering may be paid in full or
in part in the form of shares of SIRVA common stock that have been owned by the
holder for at least six months, based on the fair market value of such shares of
common stock on the date of exercise.
In the event of a participant's termination of service with SIRVA or any
subsidiary by reason of death, disability or retirement at age 65, those options
that have become vested and exercisable prior to the date of termination of
service shall remain exercisable until the first to occur of: (1) the day that
is six months after the date of termination of employment; or (2) the expiration
of the term of the option. Those options that have not become vested and
exercisable prior to the date of termination of service by reason of death,
disability or retirement at age 65 shall be canceled immediately upon such
termination of service.
In the event of the participant's termination of service with SIRVA or any
subsidiary for cause, then all vested and unvested options held by a participant
shall be forfeited and terminated immediately upon such termination of service.
In the event a participant's service with SIRVA or any subsidiary is
terminated for any other reason, such participant's vested and exercisable
options shall remain exercisable solely until the first to occur of:
- the 60th day after the earliest of the expiration of Clayton, Dubilier &
Rice Fund V Limited Partnership's right to purchase the options or receipt
of written notice that Clayton, Dubilier & Rice Fund V Limited Partnership
does not intend to exercise its right to purchase the options (see
Repurchase Provisions below) and
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- the expiration of the term of the options. Those options that have not
become vested and exercisable prior to the date of termination of service
shall be canceled immediately upon such termination of employment.
Upon a "Change in Control" in SIRVA or North American Van Lines (as defined
in the stock incentive plan), each vested and unvested service option, all
vested performance options and a percentage of the unvested performance options
will be canceled in exchange for a payment in cash of an amount equal to the
excess, if any, of the price paid in the change in control transaction over the
exercise price. All remaining unvested performance options will be canceled. Any
payments made in such event will generally be paid within 30 days after the
change in control and will be made in cash or in shares of capital stock of the
acquirer, as determined by the SIRVA Board. Notwithstanding the foregoing, if
the SIRVA Board determines before the change in control either that:
- all outstanding options will be honored or assumed by the acquirer, or
- alternative options with equal or better terms will be made available, the
outstanding options will not be canceled, their vesting and exercisability
will not be accelerated, and there will be no payment in exchange for the
options.
To be approved by the Board, any alternative options offered must:
- have substantially equivalent economic value to the outstanding options,
and
- must have terms which provide, upon the involuntary termination of an
optionee's employment within two years of the Change in Control, for
either (a) unrestricted exercisability and transferability of the
alternative options; or (b) a payment in exchange for any alternative
options that equals the difference between the exercise price of such
alternative options and the fair market value of the stock subject to such
alternative options at the time of the involuntary termination.
Options cannot be transferred or assigned by a participant other than by
will or by the laws of descent or to the SIRVA or Clayton, Dubilier & Rice
Fund V Limited Partnership under their right to purchase options on termination
of employment. In addition, options can be exercised only by a participant on a
participant's estate after death.
If the employment of a participant terminates for any reason before the
first public offering, SIRVA and Clayton, Dubilier & Rice Fund V Limited
Partnership each have an option to repurchase all or any portion of any shares
of SIRVA common stock or options to purchase shares of SIRVA common stock. SIRVA
and Clayton, Dubilier & Rice Fund V Limited Partnership are not obligated to
purchase securities, except in limited circumstances.
If service is terminated by SIRVA or any subsidiary (1) without cause;
(2) by death, disability or retirement at age 65; or (3) by resignation of the
participant, the repurchase price for the stock is its fair market value as
determined in good faith by the SIRVA Board based on an independent appraisal
using various financial methodologies. The purchase price for any options equals
the excess, if any, of (1) the fair market value of the shares issuable upon
exercise of the options purchased as of the date of termination over (2) the
aggregate exercise price of the options.
If service is terminated by SIRVA or any subsidiary with cause, the
repurchase price for the stock is the lesser of the fair market value and the
original purchase price. As discussed above, any options are immediately
forfeited.
Participants who have terminated their employment with SIRVA or any
subsidiary are entitled to keep any shares that are not repurchased by SIRVA or
Clayton, Dubilier & Rice Fund V Limited Partnership.
Participants have the right to require SIRVA to repurchase their shares if
their employment terminates by reason of death, disability or requirement at age
65.
For participants who acquired shares prior to July 1, 2000, the fair market
value of any shares to be repurchased is determined as of the effective date of
termination of employment. For participants who acquired shares on or after
July 1, 2000, the fair market value of any shares to be repurchased is
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determined as of the later of (i) the effective date of termination of
employment or (ii) six months and one day after the date of acquisition.
All repurchase rights and obligations will expire automatically upon the
consummation of a public offering and will not apply to shares offered or sold
in connection with such an offering.
SIRVA and Clayton, Dubilier & Rice Fund V Limited Partnership are entitled
to apply any portion of the purchase price of shares or options to discharge any
indebtedness a participant may owe to SIRVA or to North American Van Lines or
indebtedness that is guaranteed by North American Van Lines, including, without
limitation, indebtedness incurred by such participant to purchase shares of
common stock.
REGISTRATION RIGHTS
SIRVA and Clayton, Dubilier & Rice Fund V Limited Partnership are parties to
a registration and participation agreement, dated as of March 30, 1998, as
amended. On November 19, 1999, SIRVA and Clayton, Dubilier & Rice Fund V Limited
Partnership amended the registration and participation agreement to add Exel as
a party. This agreement permits holders of securities of SIRVA who collectively
own at least 50% of SIRVA common stock to require SIRVA to register their
securities and pay for such registration under certain conditions. Because
Clayton, Dubilier & Rice Fund V Limited Partnership holds more than 50% of SIRVA
common stock, it is the only shareholder able to initiate the initial
registration by itself. Furthermore, members of management generally do not have
registration rights under the registration and participation agreement for
shares of SIRVA common stock issued upon exercise of options if SIRVA has
registered such shares under the Securities Act. If SIRVA files a registration
statement under the Securities Act with respect to a public offering of its
common stock, members of management who have previously purchased SIRVA common
stock are not permitted to effect any public sale or distribution of any shares
of such stock during the 20 days before and the 180 days after the effective
date of the registration statement (other than as part of the public offering).
SEPARATION AGREEMENT WITH JEFFREY P. GANNON
As of April 2, 2001, SIRVA and Mr. Gannon entered into a separation
agreement pursuant to which Mr. Gannon resigned from his service as President
and Chief Executive Officer and as a Director of SIRVA. As described below, any
liabilities which may have accrued to SIRVA under Mr. Gannon's employment
agreement have been satisfied by the separation agreement.
Under the terms of the separation agreement during the one-year period
following his resignation, Mr. Gannon will continue to receive his annual base
salary payable in accordance with SIRVA's usual payroll practices, with SIRVA
retaining the right to accelerate the payment of all or a portion of such
benefit at any time. In addition, Mr. Gannon will continue to receive medical
and welfare benefits during such one-year period as if he had remained in the
employ of SIRVA. Both of these benefits are subject to reduction if Mr. Gannon
obtains other employment within such one-year period. Mr. Gannon also received
payment of any earned and unpaid base salary for the period prior to the date of
termination. Upon his resignation, all of Mr. Gannon's 22,500 options were
cancelled without payment and all of his 7,500 shares of SIRVA common stock were
repurchased by SIRVA for a purchase price of $142 per share (their fair market
value as of the date of repurchase and the price at which Mr. Gannon originally
purchased such shares).
Mr. Gannon has agreed that during the five years following termination of
his employment with SIRVA, he will refrain from disclosing confidential
information regarding SIRVA. Additionally, for the one-year period following his
resignation, Mr. Gannon will not:
- participate in any business that is engaged in the business of or that is
otherwise in competition with any business conducted by SIRVA or its
affiliates;
- induce or attempt to induce any employee of SIRVA or its affiliates to
leave the employ of SIRVA or its affiliates or
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- solicit any business relationship that is competitive with the business or
relationship of SIRVA or any of its affiliates with any agent, customer,
client, distributor or vendor.
SEPARATION AGREEMENT WITH RICHARD H. BOGAN
As of August 31, 2001, SIRVA and Mr. Bogan entered into a Separation
Agreement pursuant to which Mr. Bogan resigned from his service as President,
Logistics Services. As described below, any liabilities that may accrue to SIRVA
under Mr. Bogan's employment agreement have been satisfied by the Separation
Agreement.
Under the terms of the Separation Agreement, during a one year period
following his resignation, Mr. Bogan will continue to receive his annual base
salary payable in accordance with SIRVA's usual payroll practices. This benefit
ceases as of such time as Mr. Bogan begins any new employment or becomes self-
employed.
In addition, Mr. Bogan will continue to receive medical and welfare benefits
during such one year period as if he had remained in the employ of SIRVA. These
benefits are subject to reduction if Mr. Bogan obtains other employment.
Mr. Bogan has agreed that during the one year following the effective date
of the Separation Agreement, he will refrain from disclosing confidential
information regarding SIRVA. Additionally, for the one year following his
resignation, Mr. Bogan will not:
- become employed by, or engage in business with, or act as a consultant to,
any business or entity that competes in a material way with SIRVA's
domestic and foreign logistics, blanketwrap or high tech business
solutions, or
- solicit or induce any employee, consultant or agent of SIRVA to leave
employment with SIRVA or end its agency relationship with SIRVA.
RETIREMENT PLANS
SIRVA sponsors the NAVL, Inc. Employee Retirement Plan, a funded,
non-contributory defined benefit pension plan covering eligible employees of
North American Van Lines in the United States. SIRVA also sponsors an excess
benefit plan which is an unfunded, non-qualified plan that provides retirement
benefits not otherwise provided under the retirement plan because of the benefit
limitations imposed by Section 415 and 401(a)(17) of the Internal Revenue Code.
The excess benefit plan ensures that an executive receives the total pension
benefit to which he or she would otherwise be entitled, were it not for such
Code limitations. Ronald L. Milewski and Ralph A. Ford were the only Named
Executives participating in these plans during fiscal year 2001.
The retirement plan provides each eligible employee with retirement benefits
based principally on years of service with North American Van Lines,
compensation rates over that time, and estimated primary Social Security
benefits. The following table shows the estimated annual pension benefits
payable to a covered participant at normal retirement age (65) under both the
retirement plan and the excess benefit plan. These benefits are based on the
final pay formula contained in the retirement plan that applies to all benefits
and that accrue under both plans, which is discussed below.
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PENSION PLAN TABLE
<Table>
<Caption>
YEARS OF SERVICE
------------------------------------------------------------
AVERAGE ANNUAL COMPENSATION 5 10 15 20 25
--------------------------- ---------------- -------- -------- -------- --------
$200,000.......................... $13,690 $ 27,379 $ 41,069 $ 54,758 $ 68,448
$225,000.......................... $15,565 $ 31,129 $ 46,694 $ 62,258 $ 77,823
$250,000.......................... $17,440 $ 34,879 $ 52,319 $ 69,758 $ 87,198
$275,000.......................... $19,315 $ 38,629 $ 57,944 $ 77,258 $ 96,573
$300,000.......................... $21,190 $ 42,379 $ 63,569 $ 84,758 $105,948
$400,000.......................... $28,690 $ 57,379 $ 86,069 $114,758 $143,448
$600,000.......................... $43,690 $ 87,379 $131,069 $174,758 $218,448
$800,000.......................... $58,690 $117,379 $176,069 $234,758 $293,448
$1,000,000........................ $73,690 $147,379 $221,069 $294,758 $368,448
$1,200,000........................ $88,690 $177,379 $266,069 $354,758 $443,448
</Table>
Benefits available under the retirement plan and the excess benefit plan are
subject to offset for Social Security benefits. Compensation taken into account
under the plans is the average monthly compensation paid to a participant during
the consecutive 60-month period over the most recent 120-month period that
produces the highest average compensation. For this purpose, compensation
includes the total of base salary and bonus.
Benefits are payable in the form of straight life annuity or a joint and
survivor annuity. As of December 31, 2001, Mr. Ford had accrued 2.25 years of
credited service. Mr. Milewski had accrued 6 years of credited service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board established a Compensation Committee to review all compensation
arrangements for executive officers of North American Van Lines. The individuals
serving on the Compensation Committee during 2001 were James W. Rogers
(Chairman), Edmund M. Carpenter and Kenneth E. Homa. Mr. Rogers, who serves as
President and Chief Executive Officer of SIRVA, is a principal of Clayton,
Dubilier & Rice, Inc., a limited partner of CD&R Associates Fund V Limited
Partnership and CD&R Associates Fund VI Limited Partnership and a stockholder
and director of CD&R Investment Associates II, Inc. and CD&R Investment
Associates VI, Inc.
Clayton, Dubilier & Rice, Inc. receives an annual fee for management and
financial consulting services to North American Van Lines, including expenses.
The consulting fees paid to Clayton, Dubilier & Rice, Inc. were $400,000 for
each of 1998 through 2000. Such consulting fees were increased to $1.0 million
annually from January 1, 2001 and will be reviewed on an annual basis. North
American Van Lines paid Clayton, Dubillier & Rice, Inc. an additional $375,000
in consulting fees in 2001 in connection with the services provided by
Mr. Rogers as President and Chief Executive Officer of North American Van Lines
since his election on April 2, 2001. Mr. Rogers receives no compensation for his
services as President and Chief Executive Officer. SIRVA and North American Van
Lines have also agreed to indemnify the members of the Boards to the full extent
permitted by Delaware law, and to indemnify Clayton, Dubilier & Rice, Inc. and
Clayton, Dubilier & Rice Fund V Limited Partnership (together with any other
investment vehicle managed by Clayton, Dubilier & Rice, Inc., including Clayton,
Dubilier & Rice Fund VI Limited Partnership, their respective directors,
officers, partners, employees, agents and controlling persons) against certain
liabilities incurred under the federal securities laws and other laws regulating
the business of North American Van Lines and certain other claims and
liabilities with respect to their services for SIRVA and North American Van
Lines.
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OWNERSHIP OF CAPITAL STOCK
SIRVA owns all of the outstanding capital stock of North American Van Lines.
The outstanding capital stock of SIRVA is beneficially owned as set forth in the
following table, which includes information as of May 20, 2002 as to
(1) each person known to North American Van Lines to own five percent or
more of the common stock of SIRVA,
(2) each director of North American Van Lines,
(3) each executive officer of North American Van Lines listed in the Summary
Compensation Table under "Management" above, and
(4) all directors and executive officers of North American Van Lines as a
group.
<Table>
<Caption>
NUMBER PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF SHARES OF SHARES
- --------------------------------------- ---------- -----------
Clayton, Dubilier & Rice Fund V Limited Partnership(2) ..... 1,016,459 57.6%
1403 Foulk Road, Suite 106
Wilmington, Delaware 19803
Clayton, Dubilier & Rice Fund VI Limited Partnership(3) .... 422,537 24.0%
1403 Foulk Road, Suite 106
Wilmington, Delaware 19803
NFC International Holdings (Netherlands II) BV(4) .......... 318,779 13.1%
c/o Exel plc
Ocean House
The Ring
Bracknell
Berkshire RG12 1AW
England
</Table>
<Table>
<Caption>
NAME OF EXECUTIVE OFFICER OR DIRECTOR
- -------------------------------------
James W. Rogers............................................. 10,000 *
Michael P. Fergus(5)........................................ 6,738 *
Ronald L. Milewski(6)....................................... 7,429 *
Ralph A. Ford(7)............................................ 5,929 *
Larry L. Gunther............................................ -- *
Michael G. Babiarz.......................................... -- --
Edmund M. Carpenter......................................... -- --
Kevin J. Conway............................................. -- --
Kenneth E. Homa............................................. 2,500 *
Carl T. Stocker............................................. -- --
All directors and executive officers as a group (20
persons)(8)............................................... 44,037 2.3%
</Table>
- ------------------------
* Less than 1%
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, a person is deemed a "beneficial owner" of a security if he or she
has or shares the power to vote or direct the voting of such security or the
power to dispose or direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities which that person has
the right to acquire
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beneficial ownership of within 60 days. More than one person may be deemed
to be a beneficial owner of the same securities.
(2) CD&R Associates V Limited Partnership, a Cayman Islands exempted limited
partnership, is the general partner of Clayton, Dubilier & Rice Fund V
Limited Partnership and has the power to direct Clayton, Dubilier & Rice
Fund V Limited Partnership as to the voting and disposition of shares held
by Clayton, Dubilier & Rice Fund V Limited Partnership. CD&R Investment
Associates II, Inc., a Cayman Island exempted company, is the managing
general partner of Associates V and has the power to direct Associates V as
to its direction of Clayton, Dubilier & Rice Fund V Limited Partnership's
voting and disposition of the shares held by Clayton, Dubilier & Rice
Fund V Limited Partnership. No person controls the voting and disposition of
CD&R Investment Associates II, Inc. with respect to the shares owned by
Clayton, Dubilier & Rice Fund V Limited Partnership. Each of CD&R
Associates V Limited Partnership and CD&R Investment Associates II, Inc.
expressly disclaims beneficial ownership of the shares owned by Clayton,
Dubilier & Rice Fund V Limited Partnership. The business address for each of
Clayton, Dubilier & Rice Fund V Limited Partnership, CD&R Associates V
Limited Partnership and CD&R Investment Associates II, Inc. is 1403 Foulk
Road, Suite 106, Wilmington, Delaware 19803.
(3) CD&R Associates VI Limited Partnership, a Cayman Islands exempted limited
partnership, is the general partner of Clayton, Dubilier & Rice Fund VI
Limited Partnership and has the power to direct Clayton, Dubilier & Rice
Fund VI Limited Partnership as to the voting and disposition of shares held
by Clayton, Dubilier & Rice Fund VI Limited Partnership. CD&R Investment
Associates VI, Inc., a Cayman Island exempted company, is the general
partner of CD&R Associates VI Limited Partnership and has the power to
direct CD&R Associates VI Limited Partnership as to its direction of
Clayton, Dubilier & Rice Fund VI Limited Partnership's voting and
disposition of the shares held by Clayton, Dubilier & Rice Fund VI Limited
Partnership. No person controls the voting and disposition of CD&R
Investment Associates VI, Inc. with respect to the shares owned by Clayton,
Dubilier & Rice Fund VI Limited Partnership. Each of CD&R Associates VI
Limited Partnership and CD&R Investment Associates VI, Inc. expressly
disclaims beneficial ownership of the shares owned by Clayton, Dubilier &
Rice Fund VI Limited Partnership. The business address for each of Clayton,
Dubilier & Rice Fund VI Limited Partnership, CD&R Associates VI Limited
Partnership and CD&R Investment Associates VI, Inc. is 1403 Foulk Road,
Suite 106, Wilmington, Delaware 19803.
(4) Includes 87,480 shares issuable to NFC International Holdings
(Netherlands II) upon exercise of the warrant received by Exel as part of
the consideration for the sale of the Allied business.
(5) Includes 2,738 shares issuable to Mr. Fergus upon exercise of options
exercisable within 60 days.
(6) Includes 4,429 shares issuable to Mr. Milewski upon exercise of options
exercisable within 60 days.
(7) Includes 2,225 shares issuable to Mr. Ford upon exercise of options
exercisable within 60 days.
(8) Includes approximately 12,614 shares issuable upon exercise of options
exercisable within 60 days.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Each of Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman
Islands exempted limited partnership, and Clayton, Dubilier & Rice Fund VI
Limited Partnership, a Cayman Islands exempted limited partnership, is a private
investment fund managed by Clayton, Dubilier & Rice, Inc. Amounts contributed to
Clayton, Dubilier & Rice Fund V Limited Partnership or to Clayton, Dubilier &
Rice Fund VI Limited Partnership by its limited partners are invested at the
discretion of the general partner in equity or equity-related securities of
entities formed to effect leveraged acquisition transactions and in the equity
of corporations where the infusion of capital, coupled with the provision of
managerial assistance by Clayton, Dubilier & Rice, Inc., can be expected to
generate returns on investments comparable to returns historically achieved in
leveraged acquisition transactions.
The general partner of Clayton, Dubilier & Rice Fund V Limited Partnership
is CD&R Associates V Limited Partnership ("Associates V"). Associates V has
three general partners. The managing general partner of Associates V is CD&R
Investment Associates II, Inc. ("Investment Associates II"). The other general
partners of Associates V are CD&R Cayman Investment Associates, Inc., a Cayman
Islands exempted company ("Associates Cayman Inc."), and CD&R Investment
Associates, Inc., a Delaware corporation ("Associates Inc."). Under the
partnership agreement of Associates V, all management authority (other than with
respect to the amendment of the partnership agreement) is vested in Investment
Associates II. The general partner of Clayton, Dubilier & Rice Fund VI Limited
Partnership is CD&R Associates VI Limited Partnership ("Associates VI").
Associates VI has a general partner, CD&R Investment Associates VI, Inc.
("Investment Associates VI"). An organizational chart showing the ownership
structure of SIRVA, on an undiluted basis, and NAVL is set forth below:
[GRAPHIC OMITTED]
Each of James Rogers, Michael Babiarz, Kevin Conway and Richard Schnall, who
are principals of Clayton, Dubilier & Rice, Inc., and limited partners of
Associates V and Associates VI and stockholders and directors of Investment
Associates II and Investment Associates VI, is a director of North American Van
Lines. Mr. Conway is also a Vice President and the Secretary of Investment
Associates II and Investment Associates VI. In addition, Edmund Carpenter, a
director of North American Van Lines, is a former professional employee of
Clayton, Dubilier & Rice, Inc.
Clayton, Dubilier & Rice, Inc. is a private investment firm that is
organized as a Delaware corporation. Clayton, Dubilier & Rice, Inc. is the
manager of a series of investment funds, including Clayton, Dubilier & Rice Fund
V Limited Partnership and Clayton, Dubilier & Rice Fund VI Limited Partnership,
formed to invest in equity or equity-related securities. Clayton, Dubilier &
Rice, Inc. generally assists in structuring, arranging financing for and
negotiating the transactions in which the funds it manages invest. After the
consummation of such transactions, Clayton, Dubilier & Rice, Inc. generally
provides management and financial consulting services to the companies in which
its investment funds have invested during the period of such funds' investment.
Such services include helping such companies to establish effective banking,
legal and other business relationships and assisting management in developing
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and implementing strategies for improving the operational, marketing and
financial performance of such companies.
SIRVA, North American Van Lines and Clayton, Dubilier & Rice, Inc. are
parties to an Amended and Restated Consulting Agreement, dated as of January 1,
2001, pursuant to which Clayton, Dubilier & Rice, Inc. provides financial
advisory and management consulting services to SIRVA and North American Van
Lines. Clayton, Dubilier & Rice, Inc. is paid a management fee of $1.0 million
annually, which is reviewed on an annual basis. For the three months ended
March 31, 2002 and the year ended December 31, 2001 Clayton, Dubilier & Rice,
Inc. was paid an additional $0.125 million and $0.375 million, respectively, in
connection with the services provided by Mr. Rogers, a principal of Clayton,
Dubilier & Rice, Inc., as President and Chief Executive Officer of SIRVA and
North American Van Lines since his election on April 2, 2001. Mr. Rogers
receives no compensation for his services as President and Chief Executive
Officer.
SIRVA and North American Van Lines have also entered into an Indemnification
Agreement, dated as of March 30, 1998, in favor of Clayton, Dubilier & Rice,
Inc. and Clayton, Dubilier & Rice Fund V Limited Partnership (together with any
other investment vehicle managed by Clayton, Dubilier & Rice, Inc., including
Clayton, Dubilier & Rice Fund VI Limited Partnership, their respective
directors, officers, partners, employees, agents and controlling persons, the
"Indemnitees"), pursuant to which SIRVA and North American Van Lines have
agreed, subject to certain exceptions, to indemnify and hold harmless the
members of the boards of directors of SIRVA and North American Van Lines to the
full extent permitted by Delaware law, and to indemnify the Indemnitees from and
against any suits, claims, damages or expenses that may be made against or
incurred by them under applicable securities laws in connection with offerings
of securities of North American Van Lines, liabilities to third parties arising
out of any action or failure to act by North American Van Lines, and, except in
the case of gross negligence or intentional misconduct, the provision by
Clayton, Dubilier & Rice, Inc. of management, consulting and financial advisory
services.
North American Van Lines has guaranteed loans as of May 20, 2002 in an
aggregate principal amount of $0.5 million, to eight members of management in
connection with their investment in SIRVA. These loans mature on various dates
in 2004 and bear interest at the prime rate plus 1.0%.
An affiliate of Exel, NFC International Holdings (Netherlands II) BV, holds
a Common Stock Purchase Warrant issued by SIRVA in connection with the Allied
Aquisition. The warrant entitles the holder to purchase 87,480 shares of common
stock of SIRVA, par value $0.01 per share, at an exercise price of $400.00 per
share. The term of the warrant is five years and it contains customary
anti-dilution protections. In addition, the warrant and any shares issued upon
its exercise are subject to certain transfer restrictions, including rights of
first refusal and drag-along rights in our favor and in favor of Clayton,
Dubilier & Rice Fund V Limited Partnership and hold-back covenants.
An affiliate of Exel also holds 24,500 shares of junior preferred stock of
SIRVA, which shares have an initial liquidation preference of $24.5 million. The
dividend rate on this junior preferred stock is 12.4% compounded quarterly,
although the payment of dividends is subject to the discretion of the Board of
Directors of SIRVA and the ability of SIRVA to pay dividends is subject to our
various debt agreements, including the indenture and the senior credit facility.
In limited circumstances the junior preferred stock is exchangeable at the
option of SIRVA for subordinated exchange debentures of SIRVA. Subject to the
terms of our debt agreements, including the indenture and the senior credit
facility agreements, the junior preferred stock is required to be redeemed on
the eleventh anniversary of its issue date, or upon the occurrence of certain
other events. In addition, SIRVA has a right, subject to the terms of its debt
agreements, to redeem the junior preferred stock at any time after the first
anniversary of its issue date.
SIRVA and Exel are parties to a letter agreement which gives Exel the right,
so long as it or any of its affiliates holds ten percent of the outstanding
shares of SIRVA, to nominate one director to the board of directors of SIRVA and
North American Van Lines. The remaining members of the boards are appointed
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by Clayton, Dubilier & Rice Fund V Limited Partnership. The letter agreement
also imposes certain restrictions on the transfer of the 174,961 shares of
common stock of SIRVA held by NFC International Holdings (Netherlands II), such
as rights of first refusal, drag-along rights and hold-back covenants.
SIRVA and Clayton, Dubilier & Rice Fund V Limited Partnership are parties to
a Registration and Participation Agreement, dated as of March 30, 1998, as
amended, which permits holders of securities of SIRVA to require SIRVA to
register their securities and pay for such registration under certain
conditions. In connection with the Allied Acquisition, this agreement was
amended to include Exel as a party and to accord Exel the right, so long as it
or its affiliate owns 115,650 shares of common stock of SIRVA, to demand that
SIRVA register its securities. In addition, the amendment allows Exel or such
affiliate to participate in the demand rights exercised by other holders of
SIRVA securities and if Clayton, Dubilier & Rice Fund V Limited Partnership or
any other investment vehicle managed by Clayton, Dubilier & Rice, Inc.,
including Clayton, Dubilier & Rice Fund VI Limited Partnership, subscribes for
additional shares of the SIRVA, to buy a pro rata portion of such shares.
SIRVA and Clayton, Dubilier & Rice Fund V Limited Partnership are parties to
a Stock Subscription Agreement, dated as of March 30, 1998, which sets forth the
terms and conditions of the purchase by Clayton, Dubilier & Rice Fund V Limited
Partnership of 615,050 shares of common stock of SIRVA. Pursuant to such
agreement, Clayton, Dubilier & Rice Fund V Limited Partnership is entitled to
consult with SIRVA with respect to the operation of SIRVA or any of its
subsidiaries at any time, to have observers attend meetings of the board of
directors of SIRVA and certain of its subsidiaries and to receive all quarterly
and annual financial reports and budgets, as well as other documents, of SIRVA.
In addition, the Stock Subscription Agreement imposes certain restrictions on
the transfer of the shares of common stock of SIRVA owned by Clayton,
Dubilier & Rice Fund V Limited Partnership.
On December 1, 1999, pursuant to two Stock Subscription Agreements, each
dated as of November 19, 1999, Clayton, Dubilier & Rice Fund V Limited
Partnership and Exel purchased 225,352 and 56,338 shares of common stock of
SIRVA, respectively. These Stock Subscription Agreements impose certain
restrictions on the transfer of the shares of common stock purchased under these
agreements, and provide that the purchasers of such stock are entitled to the
rights and subject to the obligations created under the Registration and
Participation Agreement described above. The proceeds of this stock subscription
were used to repay a $40 million interim loan incurred by SIRVA in connection
with the Allied Acquisition. As a result of this stock subscription, accredited
investors who were stockholders of SIRVA at the time of such subscription,
including members of management, were entitled to buy, on a pro rata basis,
additional shares of common stock from SIRVA. The total number of shares
purchased by these accredited investors was 6,562.
In connection with the Allied Acquisition, in December 1999, SIRVA offered
and sold to certain members of North American Van Lines' management shares of
its common stock and granted options to purchase such shares, pursuant to the
SIRVA Stock Incentive Plan. Several additional management offerings were made in
2000, 2001 and 2002. As of May 20, 2002, 114 members of management owned 35,720
shares of such stock and/or had been granted options to purchase 81,307
additional shares of such stock pursuant to these management stock offerings.
See "Management--SIRVA Stock Incentive Plan."
On August 25, 2000, our parent, SIRVA, and certain of its subsidiaries,
including North American Van Lines, contributed certain assets to Moveline,
Inc., then a newly incorporated corporation, in exchange for non-voting
convertible preferred stock representing approximately 30% of the initial fully
diluted capital stock of Moveline. Clayton, Dubilier & Rice Fund V Limited
Partnership invested additional funds for approximately 50% of the inital fully
diluted capital stock of Moveline. The remaining 20% of Moveline's capital stock
was reserved for issuance to Moveline management and third party business
partners.
On December 31, 2001, we completed a stock-for-stock merger with Moveline,
Inc., under an agreement and plan of merger, dated as of November 9, 2001,
pursuant to which Moveline merged with one of our wholly-owned subsidiaries,
with such subsidiary as the surviving corporation. Under the terms of
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the merger agreement, Moveline's stockholders received a fraction of a share of
the common stock of our parent, SIRVA, for each Moveline share acquired in the
merger. Immediately following the merger, we contributed the surviving
subsidiary to Allied Van Lines, Inc., another of our wholly-owned subsidiaries.
Allied Van Lines subsequently merged with that subsidiary with Allied Van Lines
as the surviving corporation. In connection with the stocks for stock merger,
Clayton, Dubilier & Rice Fund V Limited Partnership acquired 176,057 additional
shares of SIRVA. Prior to the merger, Moveline had developed and marketed a
proprietary information technology-based customer care solution that builds upon
the relocation industry's historical van-line business model.
Clayton, Dubilier & Rice Fund VI Limited Partnership and SIRVA are parties
to a Stock Subscription Agreement, dated April 12, 2002. Pursuant to such
agreement, Clayton, Dubilier & Rice Fund VI Limited Partnership is entitled to
consult with SIRVA with respect to the operations of SIRVA or any of its
subsidiaries at any time, to have observers attend meetings of the board of
directors of SIRVA and certain of its subsidiaries and to receive all quarterly
and annual financial reports and budgets, as well as other documents, of SIRVA.
In addition, the Stock Subscription Agreement imposes certain restrictions on
the transfer of the shares of common stock of SIRVA owned by Clayton,
Dubilier & Rice Fund VI Limited Partnership.
Pursuant to the Stock Subscription Agreement, Clayton, Dubilier & Rice Fund
VI Limited Partnership purchased 140,846 shares of SIRVA common stock on
April 12, 2002. The proceeds of this stock subscription were used to fund a
portion of the purchase price for North American Van Lines' purchase of National
Association of Independent Truckers, a leading provider of insurance services to
independent contract truck drivers. On May 3, 2002, Clayton, Dubilier & Rice
Fund VI Limited Partnership purchased an additional 281,691 shares of SIRVA
common stock. The proceeds of this stock subscription were used to fund a
portion of North American Van Lines' purchase of the Cooperative Resource
Services, Ltd. business that provides comprehensive relocation services to
companies and their employees, including home sale services, relocation
logistics services and mortgage lending services.
On June 4, 2002, in connection with these investments made by Clayton,
Dubilier & Rice Fund VI Limited Partnership on April 12 and May 3, 2002,
accredited investors who currently hold shares of SIRVA common stock, including
members of management, were offered the opportunity to purchase, on a pro rata
basis, additional shares of SIRVA common stock. The total number of shares
offered to such stockholders was 204,426. The offer is expected to close on or
about July 15, 2002.
On March 21, 2002, the board of directors of SIRVA approved a management
stock offering to certain new members of management. In connection with such
offering, SIRVA expects to sell up to 17,500 shares of SIRVA common stock and
options to purchase 35,000 shares of SIRVA common stock.
Our subsidiary, TransGuard Insurance Company of America, Inc., is party to
several intercompany agreements with Vanguard Insurance Agency, Inc., Allied Van
Lines, ClaimGuard, Inc. and TransGuard General Agency, Inc., governing various
matters such as the terms and conditions of the solicitation of accounts by
Vanguard on behalf of TransGuard and the payment by Allied Van Lines of certain
of TransGuard's operating expenses. Consistent with Illinois law governing the
insurance industry and with the exception of the payment by TransGuard to
Vanguard on a commission basis, all payments made pursuant to these intercompany
agreements are made on a cost-reimbursement basis, with payment amounts ranging
from $0.05 million to $2.7 million per year.
Exel plc and its affiliates provide certain information technology and real
property services to us pursuant to a transition services agreement entered into
in connection with the Allied Acquisition. In addition there are a number of
properties in the United Kingdom which are used both for operations of the
moving and storage services businesses we acquired and also for operations of
other businesses of Exel which Exel retained. Certain subsidiaries of Exel lease
or sublease, as the case may be, portions of those facilities which we acquired
in connection with the Allied Acquisition. Similarly, in the case of the shared
sites which we acquired in connection with the Allied Acquisition, Pickfords
Limited leases or subleases, as
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the case may be, to certain Exel entities portions of those facilities for their
use. The terms of these leasing and subleasing arrangements range from less than
one year to up to fifteen years and are generally at market rents and
conditions.
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR CREDIT FACILITY
GENERAL. In connection with the Allied Acquisition, we entered into a
credit facility with a syndicate of financial institutions, with The Chase
Manhattan Bank as administrative agent (the "Agent") and Banc of America
Securities LLC as syndication agent. The following summary is a description of
the principal terms of the senior credit agreement, as amended, and the related
documents governing the facility (the "Credit Documentation") and is subject to
and qualified in its entirety by reference to the Credit Documentation. The
senior credit agreement and its amendments governing the facility have been
filed as exhibits to the registration statement of which this prospectus is a
part. It is available as set forth under the heading "Where You Can Find More
Information."
The senior credit agreement originally provided for senior secured credit
facilities in an aggregate principal amount of up to $475.0 million, consisting
of:
- a revolving credit facility in an aggregate principal amount of up to
$150.0 million,
- a seven-year term loan of $150.0 million (the "Tranche A Term Loan") and
- an eight-year term loan of $175.0 million (the "Tranche B Term Loan").
In connection with the purchase of the relocation services business of
Cooperative Resource Services, Ltd. on May 3, 2002, North American Van Lines
borrowed an additional $50.0 million under the Tranche B Term Loan facility.
These senior secured credit facilities are made available to North American Van
Lines. The revolving credit facility is also made available to certain foreign
subsidiaries of North American Van Lines (together with North American Van
Lines, the "Borrowers").
USE OF FACILITY. In connection with the closing of the Allied Acquisition,
North American Van Lines used the term loans and borrowed under the revolving
credit facility to refinance certain existing indebtedness and as part of the
financing for the Allied Acquisition. In connection with the purchase of the
relocation services business of Cooperative Resource Services, Ltd., North
American Van Lines used the additional $50.0 million borrowed under the Tranche
B Term Loan facility to fund a portion of the purchase price for the acquired
business, to refinance certain existing indebtedness of the acquired business,
and to refinance existing indebtedness under the revolving credit facility. The
remaining unused commitment under the revolving credit facility is available to
the Borrowers from time to time for general corporate purposes.
GUARANTEE AND SECURITY. The obligations of North American Van Lines are
guaranteed by SIRVA and certain of the existing and subsequently acquired or
organized domestic subsidiaries of North American Van Lines. In the event that
any foreign subsidiary of North American Van Lines is permitted to borrow under
the senior credit facility, its obligations will be guaranteed by SIRVA, North
American Van Lines, certain of North American Van Lines' domestic subsidiaries
and certain of the subsidiaries, including foreign subsidiaries, of such foreign
subsidiary borrower. North American Van Lines' obligations under the senior
credit facility are secured by substantially all of the tangible and intangible
assets of SIRVA, North American Van Lines and certain of its domestic
subsidiaries, except that
- the stock or securities of the foreign subsidiaries of North American Van
Lines (other than any direct first-tier foreign subsidiary of North
American Van Lines) is not required to be pledged to secure these
obligations,
- no more than 65% of the stock or securities of a direct first-tier foreign
subsidiary of North American Van Lines is required to be pledged to secure
these obligations, and
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- no more than 65% of the stock or securities of any domestic subsidiary of
North American Van Lines that acts as a holding company for foreign
subsidiaries of North American Van Lines is required to be pledged to
secure these obligations.
In the event that any foreign subsidiary of North American Van Lines is
permitted to borrow under the senior credit facility, its obligations will be
secured by not more than 65% of the stock of such foreign subsidiary borrower
and by substantially all of the tangible and intangible assets of such foreign
subsidiary borrower, SIRVA, North American Van Lines, certain of North American
Van Lines' domestic subsidiaries and the capital stock of certain of the
subsidiaries, including foreign subsidiaries, of such foreign subsidiary
borrower.
AMORTIZATION; INTEREST; FEES; MATURITY. The term loan obligations under the
senior credit agreement are repayable in quarterly principal payments over seven
years, in the case of the Tranche A Term Loan, or eight years, in the case of
the Tranche B Term Loan. Loans under the revolving credit facility mature on the
seventh anniversary of the initial borrowing. The term loans and loans under the
revolving credit facility bear interest at floating rates based upon the
interest rate option we elect. As of March 31, 2002 the interest rate on the
Tranche A loan was 4.89%, the interest rate on the Tranche B loan was 5.89% and
the interest on the $56.6 million then outstanding under the revolving credit
facility was 4.91%.
The transaction fees and expenses set forth in the sources and uses of funds
for the Allied Acquisition include transaction fees payable in connection with
the commitments under the senior credit agreement. In addition, a commitment fee
is payable quarterly on the daily average undrawn portion of the revolving
credit facility, in the amount of 0.50% per annum or less, depending on our
financial performance.
PREPAYMENTS. The senior credit agreement permits voluntary prepayment of
the term loans or loans under the revolving credit facility without premium or
penalty except for breakage costs incurred in connection with prepayment during
a euro currency interest period and except as provided for in the next sentence.
Optional prepayments of Tranche B Term loans and any prepayments, whether
optional or mandatory, made as a result of or in connection with a change of
control, or any refinancing of any of the senior credit facilities, shall be at
par plus accrued interest. With limited exceptions, mandatory prepayments will
be required to be made from net cash proceeds of certain asset sales, net cash
proceeds of certain debt issuances and 50% of excess cash flow, such percentage
to be reduced to zero upon our achievement of performance criteria.
COVENANTS AND EVENTS OF DEFAULT. The senior credit facility is subject to
covenants that, among other things, restrict our ability to:
- dispose of assets,
- incur indebtedness or guarantee obligations,
- prepay other indebtedness,
- make dividends and other restricted payments,
- create liens,
- make equity or debt investments,
- make acquisitions,
- modify terms of the indenture,
- engage in mergers or consolidations,
- change the business we conduct,
- make capital expenditures
- or engage in certain transactions with affiliates.
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In addition, under the senior credit facility, North American Van Lines is also
subject to certain financial covenants, including the requirement to maintain a
minimum interest expense coverage ratio and a maximum leverage ratio. These
financial tests become more restrictive in future years. The senior credit
facility is subject to customary events of default.
SIRVA SENIOR DISCOUNT DEBT
GENERAL. In connection with the Allied Acquisition, SIRVA incurred
$35.0 million initial accreted value of unsecured senior discount term loan
borrowings from The Chase Manhattan Bank who has assigned its interest in the
loan to its affiliate, J.P. Morgan Securities Inc., (formerly known as Chase
Securities Inc.) and Blue Ridge Investments, LLC, affiliates of the initial
purchasers of the old notes. This senior discount loan will accrete at a rate of
16% per annum from its initial accreted value of $35.0 million at November 19,
1999. Such amount had accreted to $50.1 million as of March 31, 2002. Under the
loan agreement relating to the senior discount loan, as amended (the "Senior
Discount Loan Agreement"), the lenders may, at their option, exchange the senior
discount loan for senior discount notes due 2009 at any time prior to July 8,
2002, which is the next business day following the date that is 960 days after
the initial closing date, by giving written notice to SIRVA, and if they have
not done so by that date, they will be deemed to have given that notice on that
date. The issuance and delivery of the senior discount notes to the initial
holders of such notes, who are expected to be the lenders under the senior
discount loan or affiliates of those lenders will be in exchange for, and
repayment in full and cancellation of, the senior discount loan. The initial
accreted value of the senior discount notes will equal the then accreted value
of the senior discount loan. SIRVA will not receive any proceeds from the
offering and sale of the senior discount notes by the initial holders to
purchasers.
So long as the SIRVA senior discount debt is held by Blue Ridge Investments
and (J.P. Morgan Securities Inc., formerly known as Chase Securities Inc.) or
their respective affiliates as loans under the Senior Discount Loan Agreement,
the senior discount debt may be redeemed in whole or in part, at a price equal
to its accreted value plus accrued and unpaid interest, if any.
The following is a brief summary of the principal terms of the senior
discount notes, and is subject to and qualified in its entirety by reference to
the indenture by which the senior discount notes will be governed. The senior
discount loan has economic and other substantive terms substantially identical
to those of the senior discount notes.
PAYMENT. The senior discount notes will accrete until December 1, 2004 at a
rate of 16.00% per annum. Thereafter, the senior discount notes will bear
interest at a rate of 16.00% per annum, payable semi-annually. The senior
discount notes will be senior unsecured obligations of SIRVA, and will not have
the benefit of guarantees.
CHANGE OF CONTROL. Each holder of senior discount notes will be entitled to
require SIRVA, and SIRVA must offer, to repurchase the senior discount notes
held by such holder at a price of 101% of the aggregate principal amount, or
accreted value, as the case may be, of such notes, plus accrued and unpaid
interest and liquidated damages, if any, to the date of repurchase, upon the
occurrence of a Change of Control Triggering Event (as defined in the senior
discount notes indenture).
OPTIONAL REDEMPTION. SIRVA may redeem all or a part of the senior discount
notes at the redemption prices set forth in the senior discount notes indenture
plus accrued and unpaid interest, if any, on such notes, to the applicable
redemption date. The senior discount notes will not be subject to any mandatory
redemption requirements.
COVENANTS, EVENTS OF DEFAULT AND REGISTRATION RIGHTS. The senior discount
notes will be subject to covenants, events of default and registration
requirements similar to those relating to the notes described in this
prospectus.
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DESCRIPTION OF NOTES
GENERAL
North American Van Lines issued the old notes, and will issue the new notes,
under an indenture, dated as of November 19, 1999, among itself, the initial
Note Guarantors and State Street Bank and Trust Company, as trustee. The
indenture has been filed as an exhibit to the registration statement of which
this prospectus is a part. It is available as set forth under the heading "Where
You Can Find More Information." The terms of the new notes are identical to the
terms of the old notes, except that the new notes will be registered under the
Securities Act, and therefore will not contain restrictions on transfer, will
not contain provisions relating to additional interest, and will contain terms
of an administrative nature that differ from those of the old notes. New notes
will otherwise be treated as notes for the purposes of the indenture.
The following is a summary of the material provisions of the indenture. This
summary does not contain all of the information that may be important to an
investor in the notes. It is subject to, and is qualified in its entirety by
reference to, all the provisions of the indenture, including terms defined in
the indenture and provisions of the Trust Indenture Act of 1939, as amended
("TIA"). Whenever particular defined terms of the indenture not otherwise
defined here are referred to, those defined terms are incorporated here by
reference. For definitions of certain capitalized terms used in the following
summary, see "--Certain Definitions" below. In this summary, "North American Van
Lines" refers only to North American Van Lines, Inc., and its successors under
the indenture and not to any of North American Van Lines, Inc.'s subsidiaries.
The notes will be unsecured obligations of North American Van Lines, ranking
subordinate in right of payment to all Senior Indebtedness of North American Van
Lines.
TERMS OF THE NOTES
The notes will mature on December 1, 2009. Subject to the terms of the
registration rights agreement described under "--Registration Rights" below,
each note will bear interest at a rate of 13 3/8% per annum from the date of
issuance, or from the most recent date to which interest has been paid or
provided for, payable semiannually in cash on June 1 and December 1 of each
year, commencing June 1, 2000, to holders of record at the close of business on
the May 15 or November 15 immediately preceding the interest payment date.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
In addition to the notes offered hereby, North American Van Lines may from
time to time issue additional notes ("Additional Notes") in an aggregate
principal amount equal to the aggregate principal amount of notes issued on the
date of the indenture. Any offering of Additional Notes is subject to the
covenant described below under the caption "--Certain Covenants--Limitation on
Indebtedness." The notes and any Additional Notes subsequently issued under the
indenture would be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. North American Van Lines will issue notes in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The notes will mature on December 1, 2009.
Except where the context otherwise requires, in this "Description of Notes,"
references to the notes include any old notes or Additional Notes, as well as
the new notes.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
Payments of principal, premium, if any, and interest will be made at the
office or agency of North American Van Lines in the Borough of Manhattan, The
City of New York (which initially shall be the corporate trust office of an
affiliate of the trustee) or the corporate trust office of an affiliate of the
Paying
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Agent in New York City, except that, at the option of North American Van Lines,
payment of interest may be made by check mailed to the address of each
registered holder of the notes as such address appears in the Note Register, or,
if a holder has given wire instructions to North American Van Lines, by wire
transfer to a United States dollar account maintained by the holder with a bank
located in New York City.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as principal Paying Agent and Registrar at
the corporate trust offices of its affiliate in the City of New York, State of
New York. North American Van Lines may change the Paying Agent or Registrar
without prior notice to the holders, and North American Van Lines or any of its
Subsidiaries may act as Paying Agent or Registrar.
OPTIONAL REDEMPTION
The notes will be redeemable, at North American Van Lines' option, in whole
or in part, and from time to time on and after December 1, 2004 and prior to
maturity. Such redemption may be made upon notice mailed by first-class mail to
each holder's registered address, not less than 30 nor more than 60 days prior
to the redemption date. The notes will be so redeemable at the following
redemption prices (expressed as a percentage of principal amount), plus accrued
interest, if any, to the relevant redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on December 1 of the years set forth below:
<Table>
<Caption>
REDEMPTION
PERIOD PRICE
- ------ ----------
2004........................................................ 106.688%
2005........................................................ 104.458%
2006........................................................ 102.229%
2007 and thereafter......................................... 100.000%
</Table>
In addition, at any time and from time to time prior to December 1, 2002,
North American Van Lines at its option may redeem notes in an aggregate
principal amount equal to up to 35% of the original aggregate principal amount
of the notes (including the principal amount of any Additional Notes), with
funds in an aggregate amount (the "Redemption Amount") not exceeding the
aggregate proceeds of one or more Equity Offerings (as defined below) at a
redemption price (expressed as a percentage of principal amount thereof) of
113.375% plus accrued interest, if any, to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that an aggregate
principal amount of notes equal to at least 65% of the original aggregate
principal amount of the notes (including the principal amount of any Additional
Notes) must remain outstanding after each such redemption. "Equity Offering"
means a sale of Capital Stock (other than Disqualified Stock) (X) that is a sale
of Capital Stock of North American Van Lines, or (Y) proceeds of which in an
amount equal to or exceeding the Redemption Amount are contributed to North
American Van Lines or any of its Restricted Subsidiaries. North American Van
Lines may make such redemption upon notice mailed by first-class mail to each
holder's registered address, not less than 30 nor more than 60 days prior to the
redemption date (but in no event more than 180 days after the completion of the
related Equity Offering).
SELECTION
In the case of any partial redemption, selection of the notes for redemption
will be made by the trustee on a PRO RATA basis, by lot or by such other method
as the trustee in its sole discretion shall deem to be fair and appropriate,
although no note of $1,000 in original principal amount or less will be redeemed
in part. If any note is to be redeemed in part only, the notice of redemption
relating to such note shall state
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the portion of the principal amount thereof to be redeemed. A new note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original note.
NOTE GUARANTEES
On the Issue Date, each Domestic Subsidiary that then guarantees payment by
North American Van Lines of Bank Indebtedness of North American Van Lines will
also guarantee payment of the notes. In addition, after the Issue Date, North
American Van Lines will cause each Domestic Subsidiary that guarantees payment
by North American Van Lines of Bank Indebtedness of North American Van Lines to
execute and deliver to the trustee a supplemental indenture or other instrument
pursuant to which such Subsidiary will guarantee payment of the notes, whereupon
such Subsidiary will become a Note Guarantor for all purposes under the
indenture. North American Van Lines will also have the right to cause any other
Subsidiary so to guarantee payment of the Notes. Note Guarantees will be subject
to release and discharge under certain circumstances prior to payment in full of
the notes. See "--Certain Covenants--Future Note Guarantors."
RANKING
The indebtedness evidenced by the notes is unsecured Senior Subordinated
Indebtedness of North American Van Lines, is subordinated in right of payment,
as set forth in the indenture, to the payment when due in full in cash of all
existing and future Senior Indebtedness of North American Van Lines, including
North American Van Lines' obligations under the Senior Credit Facility, ranks
PARI PASSU in right of payment with all existing and future Senior Subordinated
Indebtedness of North American Van Lines and is senior in right of payment to
all existing and future Subordinated Obligations of North American Van Lines.
The notes are also effectively subordinated to any Secured Indebtedness of North
American Van Lines to the extent of the value of the assets securing such
Indebtedness. However, payment from the money or the proceeds of U.S. Government
Obligations held in any defeasance trust described under "--Defeasance" below is
not subordinated to any Senior Indebtedness or subject to the restrictions
described herein.
At March 31, 2002, Senior Indebtedness consisting of indebtedness for
borrowed money of North American Van Lines was $362.6 million and North American
Van Lines had additional availability of $77.5 million for borrowings under the
Senior Credit Facility, all of which would have been Secured Indebtedness, and
no Senior Subordinated Indebtedness (other than the Indebtedness represented by
the notes) and no Subordinated Obligations. Although the indenture contains
limitations on the amount of additional Indebtedness that North American Van
Lines may Incur, under certain circumstances the amount of such Indebtedness
could be substantial and, in any case, such Indebtedness may be Senior
Indebtedness or Secured Indebtedness. See "--Certain Covenants--Limitation on
Indebtedness" below.
The obligations of each Note Guarantor under the Note Guarantee to which it
is a party will be unsecured Guarantor Senior Subordinated Indebtedness of such
Note Guarantor, will be subordinated in right of payment, as set forth in the
indenture, to the payment when due in full in cash of all existing and future
Guarantor Senior Indebtedness of such Note Guarantor, including the Note
Guarantor's obligations under or relating to the Senior Credit Facility, will
rank PARI PASSU in right of payment with all existing and future Guarantor
Senior Subordinated Indebtedness of such Note Guarantor and will be senior in
right of payment to all existing and future Guarantor Subordinated Obligations
of such Note Guarantor. The Note Guarantee of each Note Guarantor will also be
effectively subordinated to any Secured Indebtedness of such Note Guarantor to
the extent of the value of the assets securing such Indebtedness. The terms on
which each Note Guarantee will be subordinated to the prior payment in full of
Guarantor Senior Indebtedness will be substantially identical to those described
below governing the subordination of the notes to the prior payment in full of
Senior Indebtedness.
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A substantial part of the operations of North American Van Lines are
conducted through its Subsidiaries. Claims of creditors of such Subsidiaries
(other than Subsidiaries that are Note Guarantors), including trade creditors,
and claims of preferred shareholders (if any) of such Subsidiaries will have
priority with respect to the assets and earnings of such Subsidiaries over the
claims of creditors of North American Van Lines, including holders of the notes.
The notes, therefore, will be effectively subordinated to creditors (including
trade creditors) and preferred shareholders (if any) of Subsidiaries of North
American Van Lines (other than Subsidiaries that are Note Guarantors). Certain
of the operations of a Note Guarantor may be conducted through Subsidiaries
thereof that are not also Note Guarantors. Claims of creditors of such
Subsidiaries, including trade creditors, and claims of preferred shareholders
(if any) of such Subsidiaries will have priority with respect to the assets and
earnings of such Subsidiaries over the claims of creditors of such Note
Guarantor, including claims under the Note Guarantee of such Note Guarantor.
Such Note Guarantee, therefore, will be effectively subordinated to creditors
(including trade creditors) and preferred shareholders (if any) of such
Subsidiaries. Although the indenture limits the incurrence of Indebtedness
(including preferred stock) by certain of North American Van Lines'
Subsidiaries, such limitation is subject to a number of significant
qualifications. As of December 31, 2001, North American Van Lines Subsidiaries
(other than Subsidiaries who became Note Guarantors on the Issue Date) would
have had substantial liabilities, including Indebtedness for borrowed money and
other balance sheet liabilities (including trade payables). No preferred stock
of such Subsidiaries was outstanding at such date. See "--Certain
Covenants--Limitation on Indebtedness" below.
"Senior Indebtedness" means, with respect to North American Van Lines, the
following obligations, whether outstanding on the date of the indenture or
thereafter issued, without duplication:
(A) all Bank Indebtedness,
(B) all obligations in respect of any Receivables Financing, and
(C) all obligations consisting of the principal of and premium, if any, and
accrued and unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to
North American Van Lines regardless of whether post-filing interest is
allowed in such proceeding) on, and fees and other amounts owing in
respect of, all other Indebtedness of North American Van Lines,
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that the obligations in
respect of such Indebtedness are not senior in right of payment to the notes;
provided, however, that Senior Indebtedness shall not include
(1) any obligation of North American Van Lines to any Subsidiary,
(2) any liability for Federal, state, foreign, local or other taxes owed or
owing by North American Van Lines,
(3) any accounts payable or other liability to trade creditors arising in
the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities),
(4) any Indebtedness of North American Van Lines (or Guarantee by North
American Van Lines of any Indebtedness) that is expressly subordinated in
right of payment to any other Indebtedness of North American Van Lines
(or Guarantee by North American Van Lines of any Indebtedness),
(5) any Capital Stock of North American Van Lines or
(6) that portion of any Indebtedness of North American Van Lines that is
Incurred by North American Van Lines in violation of the covenant
described under "--Certain Covenants--Limitation on Indebtedness" (but no
such violation shall be deemed to exist for purposes of this clause (6)
if any holder of such Indebtedness or such holder's representative shall
have received an Officer's Certificate of North American Van Lines to the
effect that such Incurrence of such
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Indebtedness does not (or that the Incurrence by North American Van Lines
of the entire committed amount thereof at the date on which the initial
borrowing thereunder is made would not) violate such covenant).
If any Senior Indebtedness is disallowed, avoided or subordinated pursuant to
the provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
Only Indebtedness of North American Van Lines that is Senior Indebtedness
will rank senior to the notes in accordance with the provisions of the
indenture. The notes will in all respects rank PARI PASSU with all other Senior
Subordinated Indebtedness of North American Van Lines. Only Indebtedness of a
Note Guarantor that is Guarantor Senior Indebtedness will rank senior to the
Note Guarantee of such Note Guarantor in accordance with the provisions of the
indenture. Such Note Guarantee will in all respects rank PARI PASSU with all
other Guarantor Senior Subordinated Indebtedness of such Note Guarantor. North
American Van Lines has agreed in the indenture that it will not Incur, directly
or indirectly, any Indebtedness that is expressly subordinated in right of
payment to Senior Indebtedness of North American Van Lines unless such
Indebtedness is PARI PASSU with, or subordinated in right of payment to, the
notes. Each Note Guarantor will agree that it will not Incur, directly or
indirectly, any Indebtedness that is expressly subordinated in right of payment
to Guarantor Senior Indebtedness of such Note Guarantor unless such Indebtedness
is PARI PASSU with, or subordinated in right of payment to, the Note Guarantee
of such Note Guarantor. Unsecured Indebtedness is not deemed to be subordinate
or junior to Secured Indebtedness merely because it is unsecured, and
Indebtedness that is not guaranteed by a particular Person is not deemed to be
subordinate or junior to Indebtedness that is so guaranteed merely because it is
not so guaranteed.
North American Van Lines may not pay principal of, or premium (if any) or
interest on, the notes or make any deposit pursuant to the provisions described
under "--Defeasance" below and may not otherwise purchase, redeem or otherwise
retire any notes (except that holders of notes may receive and retain Permitted
Junior Securities and payments made from the trust described under
"--Defeasance" if the funding of such trust is permitted under the defeasance
section of the indenture) (collectively, "pay the notes") if
(1) any Senior Indebtedness is not paid when due in cash or Cash Equivalents
or
(2) any other default on Senior Indebtedness occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms
(either such event, a "Payment Default") unless, in either case,
(A) the Payment Default has been cured or waived and any such acceleration
has been rescinded in writing or
(B) such Senior Indebtedness has been paid in full in cash or Cash
Equivalents.
However, North American Van Lines may pay the notes without regard to the
foregoing if North American Van Lines and the trustee receive written notice
approving such payment from the Representative for the Designated Senior
Indebtedness with respect to which the Payment Default has occurred and is
continuing.
In addition, during the continuance of any default (other than a Payment
Default) with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace period (a "Non-payment Default"), North
American Van Lines may not pay the notes for the period specified as follows (a
"Payment Blockage Period") (except that holders of notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
"--Defeasance" if the funding of such trust is permitted under the defeasance
section of the indenture).
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The Payment Blockage Period shall commence upon the receipt by the trustee (with
a copy to North American Van Lines) of written notice (a "Blockage Notice") of
such Non-payment Default from the Representative for such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
shall end on the earliest to occur of the following events:
(1) 179 days shall have elapsed since such receipt of such Blockage Notice,
(2) the Non-payment Default giving rise to such Blockage Notice is no longer
continuing (and no other Payment Default or Non-payment Default is then
continuing),
(3) such Designated Senior Indebtedness shall have been discharged or repaid
in full in cash or Cash Equivalents or
(4) such Payment Blockage Period shall have been terminated by written
notice to the trustee and North American Van Lines from the Person or
Persons who gave such Blockage Notice.
North American Van Lines shall promptly resume payments on the notes, including
any missed payments, after such Payment Blockage Period ends, unless any Payment
Default otherwise exists. Not more than one Blockage Notice may be given in any
360 consecutive day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period. In no event may the total
number of days during which any Payment Blockage Period is in effect extend
beyond 179 days from the date of receipt by the trustee of the relevant Blockage
Notice, and there must be a 181 consecutive day period during any 360
consecutive day period during which no Payment Blockage Period is in effect.
No nonpayment default that existed or was continuing on the date of delivery
of any Blockage Notice to the trustee shall be, or be made, the basis for a
subsequent Blockage Notice unless such default shall have been cured or waived
for a period of not less than 90 consecutive days.
Upon any payment or distribution of the assets of North American Van Lines
upon a total or partial liquidation or dissolution or reorganization of or
similar proceeding relating to North American Van Lines or its property, or in a
bankruptcy, insolvency, receivership or similar proceeding relating to North
American Van Lines or its property, the holders of Senior Indebtedness will be
entitled to receive payment in full in cash of the Senior Indebtedness before
the noteholders are entitled to receive any payment (except that holders of
notes may receive and retain Permitted Junior Securities and payments made from
the trust described under "--Defeasance" if the funding of such trust is
permitted under the defeasance section of the indenture) and until the Senior
Indebtedness is paid in full in cash, any payment or distribution to which
noteholders would be entitled but for the subordination provisions of the
indenture will be made to holders of the Senior Indebtedness as their interests
may appear. If a distribution is made to noteholders that due to the
subordination provisions should not have been made to them, such noteholders are
required to hold it in trust for the holders of Senior Indebtedness and pay it
over to them as their interests may appear.
If North American Van Lines fails to make any payment on the notes when due
or within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the indenture and would enable the holders of the notes to
accelerate the maturity thereof. See "--Defaults." If payment of the notes is
accelerated because of an Event of Default, North American Van Lines or the
trustee shall promptly notify the holders of the Bank Indebtedness or the
Representative of such holders of the acceleration. Such acceleration will not
be effective until five Business Days after such holders or the Representative
of such holders receive notice of such acceleration. Thereafter, North American
Van Lines may pay the notes only if the subordination provisions of the
indenture otherwise permit payment at that time.
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By reason of such subordination provisions contained in the indenture, in
the event of liquidation, receivership, reorganization or insolvency,
(1) creditors of North American Van Lines that are holders of Senior
Indebtedness may recover more, ratably, than the noteholders,
(2) trade creditors of North American Van Lines that are not holders of
Senior Indebtedness or of Senior Subordinated Indebtedness (including the
notes) may recover less, ratably, than holders of Senior Indebtedness and
may recover more, ratably, than holders of Senior Subordinated
Indebtedness, and
(3) North American Van Lines may be unable to meet its obligations on the
notes.
In addition, as described above, the notes will be effectively subordinated,
with respect to North American Van Lines' Subsidiaries, to the claims of
creditors of those Subsidiaries.
CHANGE OF CONTROL
Upon the occurrence after the Issue Date of a Change of Control (as defined
below) and the failure of the notes to have, on the 30th day after such Change
of Control, a rating of at least BBB- (or equivalent successor rating) by S&P
and a rating of at least Baa3 (or equivalent successor rating) by Moody's (a
"Change of Control Triggering Event"), each holder will have the right to
require North American Van Lines to repurchase all or any part of such holder's
notes at a purchase price in cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date); provided, however, that North
American Van Lines shall not be obligated to repurchase notes pursuant to this
covenant in the event that it has exercised its right to redeem all of the notes
as described under "--Optional Redemption."
The term "Change of Control" means:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders or Holding, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of more than 50% of the total
voting power of the Voting Stock of North American Van Lines, provided
that so long as North American Van Lines is a Subsidiary of Holding, no
Person shall be deemed to be or become a "beneficial owner" of more than
50% of the total voting power of the Voting Stock of North American Van
Lines unless such Person shall be or become a "beneficial owner" of more
than 50% of the total voting power of the Voting Stock of Holding;
(2) North American Van Lines sells or transfers (in one or a series of
related transactions) all or substantially all of the assets of North
American Van Lines and its Restricted Subsidiaries to another Person
(other than one or more Permitted Holders or Holding or one or more
Subsidiaries thereof); or
(3) during any period of two consecutive years (during which period North
American Van Lines has been a party to the indenture), individuals who at
the beginning of such period were members of the board of directors of
North American Van Lines (together with any new members thereof whose
election by such board of directors or whose nomination for election by
holders of Capital Stock of North American Van Lines was approved by one
or more Permitted Holders or by a vote of a majority of the members of
such board of directors then still in office who were either members
thereof at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of such board of directors then in office.
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In the event that, at the time of such Change of Control Triggering Event,
the terms of the Bank Indebtedness restrict or prohibit the repurchase of notes
pursuant to this covenant, then prior to the mailing of the notice to holders
provided for in the immediately following paragraph but in any event not later
than 30 days following the date North American Van Lines obtains actual
knowledge of any Change of Control Triggering Event (unless North American Van
Lines has exercised its right to redeem all the notes as described under
"--Optional Redemption"), North American Van Lines shall
(1) repay in full all Bank Indebtedness or offer to repay in full all Bank
Indebtedness and repay the Bank Indebtedness of each lender who has
accepted such offer or
(2) obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the notes as provided for in the
immediately following paragraph.
North American Van Lines shall first comply with the provisions of the
immediately preceding sentence before it shall be required to repurchase notes
pursuant to the provisions described below. North American Van Lines' failure to
comply with such provisions or the provisions of the immediately following
paragraph shall constitute an Event of Default described in clause (4) and not
in clause (2) under "--Defaults" below.
Unless North American Van Lines has exercised its right to redeem all the
notes as described under "--Optional Redemption," North American Van Lines
shall, not later than 30 days following the date North American Van Lines
obtains actual knowledge of any Change of Control Triggering Event having
occurred, mail a notice to each holder with a copy to the trustee stating:
(1) that a Change of Control Triggering Event has occurred or may occur and
that such holder has, or upon such occurrence will have, the right to
require North American Van Lines to purchase such holder's notes at a
purchase price in cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on a record date to receive
interest on the relevant interest payment date);
(2) the circumstances and relevant facts and financial information regarding
such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed);
(4) the instructions determined by North American Van Lines, consistent with
this covenant, that a holder must follow in order to have its notes
purchased; and
(5) if such notice is mailed prior to the occurrence of a Change of Control
or Change of Control Triggering Event, that such offer is conditioned on
the occurrence of such Change of Control Triggering Event.
North American Van Lines will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, North American Van Lines
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this covenant by virtue thereof.
The Change of Control Triggering Event purchase feature is a result of
negotiations between North American Van Lines and the initial purchasers. North
American Van Lines has no present plans to engage in a transaction involving a
Change of Control, although it is possible that North American Van Lines would
decide to do so in the future. Subject to the limitations discussed below, North
American Van Lines could, in the future, enter into certain transactions,
including acquisitions, refinancings or recapitalizations, that would not
constitute a Change of Control under the indenture, but that could increase the
amount of
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Indebtedness outstanding at such time or otherwise affect North American Van
Lines' capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
Senior Credit Agreement. Agreements governing future Senior Indebtedness of
North American Van Lines may contain prohibitions of certain events that would
constitute a Change of Control or require such Senior Indebtedness to be
repurchased or repaid upon a Change of Control. Moreover, the exercise by the
holders of their right to require North American Van Lines to repurchase the
notes could cause a default under such agreements, even if the Change of Control
itself does not, due to the financial effect of such repurchase on North
American Van Lines. Finally, North American Van Lines' ability to pay cash to
the holders upon a repurchase may be limited by North American Van Lines' then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases.
The definition of Change of Control includes a phrase relating to the sale
or other transfer of "all or substantially all" of North American Van Lines'
assets, as such phrase is used in the Revised Model Business Corporation Act.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise definition of the phrase under
applicable law. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of North American Van
Lines, and therefore it may be unclear as to whether a Change of Control has
occurred and whether the holders of the notes have the right to require North
American Van Lines to repurchase such notes.
CERTAIN COVENANTS
The indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) North American Van Lines will not, and will
not permit any Restricted Subsidiary to, Incur any Indebtedness; provided,
however, that North American Van Lines or any Note Guarantor may Incur
Indebtedness if on the date of the Incurrence of such Indebtedness, after giving
effect to the Incurrence thereof, the Consolidated Coverage Ratio would be
greater than 2.00:1.00 if such Indebtedness is Incurred on or prior to
December 1, 2001 or 2.25:1.00 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), North American Van Lines
and its Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness Incurred pursuant to Credit Facilities (including but
not limited to in respect of letters of credit or bankers' acceptances
issued or created thereunder) and (without limiting the foregoing) any
Refinancing Indebtedness in respect thereof, in a maximum principal amount
at any time outstanding (giving effect to any refinancing thereof) not
exceeding in the aggregate the amount equal to the sum of
(A) $475.0 million and
(B) the aggregate amount by which the Borrowing Base determined as of
the date of such Incurrence exceeds $245.0 million
(plus in the case of any refinancing of any Credit Facility or any portion
thereof, the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing) LESS
the aggregate principal amount of Indebtedness Incurred pursuant to this
clause (b)(1) under the Credit Facilities (or any refinancing thereof) that
is permanently repaid pursuant to the covenant described below under
"--Limitation on Sales of Assets and Subsidiary Stock";
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(2) Indebtedness
(A) of any Restricted Subsidiary to North American Van Lines or
(B) of North American Van Lines or any Restricted Subsidiary to any
Restricted Subsidiary; provided, that any subsequent issuance or
transfer of any Capital Stock of such Restricted Subsidiary to
which such Indebtedness is owed, or other event, that results in
such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any other subsequent transfer of such Indebtedness (except to
North American Van Lines or a Restricted Subsidiary) will be
deemed, in each case, an Incurrence of such Indebtedness by the
issuer thereof;
(3) Indebtedness represented by the notes (other than Additional Notes),
any Indebtedness (other than the Indebtedness described in clauses (1) or
(2) above) outstanding on the Issue Date and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (3) or
paragraph (a) above;
(4) Purchase Money Obligations and Capitalized Lease Obligations, and
any Refinancing Indebtedness with respect thereto, in an aggregate principal
amount at any time outstanding (giving effect to any refinancing thereof)
not exceeding an amount equal to the greater of
(A) $35.0 million and
(B) 5% of Consolidated Tangible Assets;
(5) Indebtedness of any Person that is assumed by North American Van
Lines or any Restricted Subsidiary in connection with its acquisition of
assets from such Person or any Affiliate thereof or is issued and
outstanding on or prior to the date on which such Person was acquired by
North American Van Lines or any Restricted Subsidiary or merged or
consolidated with or into any Restricted Subsidiary (other than Indebtedness
Incurred to finance, or otherwise in connection with, such acquisition),
PROVIDED that on the date of such acquisition, merger or consolidation,
after giving effect thereto, North American Van Lines could Incur at least
$1.00 of additional Indebtedness pursuant to paragraph (a) above; and any
Refinancing Indebtedness with respect to any such Indebtedness;
(6) (A) Guarantees by North American Van Lines or any Restricted
Subsidiary of Indebtedness or any other obligation or liability
of North American Van Lines or any Restricted Subsidiary (other
than any Indebtedness incurred by North American Van Lines or
such Restricted Subsidiary, as the case may be, in violation of
the covenant described under "--Limitation on Indebtedness"), or
(B) without limiting the covenant described under "--Limitation on
Liens," Indebtedness of North American Van Lines or any
Restricted Subsidiary arising by reason of any Lien granted by or
applicable to such Person securing Indebtedness of North American
Van Lines or any Restricted Subsidiary (other than any
Indebtedness incurred by North American Van Lines or such
Restricted Subsidiary, as the case may be, in violation of the
covenant described under "--Limitation on Indebtedness");
(7) Indebtedness of North American Van Lines or any Restricted
Subsidiary
(A) arising from the honoring of a check, draft or similar instrument
of such Person drawn against insufficient funds, provided that
such Indebtedness is extinguished within five Business Days of
its incurrence, or
(B) consisting of guarantees, indemnities, obligations in respect of
earnouts or other purchase price adjustments, or similar
obligations, Incurred in connection with the acquisition or
disposition of any business, assets or Person (including pursuant
to the Allied Acquisition);
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(8) Indebtedness of North American Van Lines or any Restricted
Subsidiary in respect of
(A) letters of credit, bankers' acceptances or other similar
instruments or obligations issued, or relating to liabilities or
obligations incurred, in the ordinary course of business
(including those issued to governmental entities in connection
with self-insurance under applicable workers' compensation
statutes),
(B) completion guarantees, surety, judgment, appeal or performance
bonds, or other similar bonds, instruments or obligations,
provided, or relating to liabilities or obligations incurred, in
the ordinary course of business,
(C) Hedging Obligations entered into for bona fide hedging purposes
in the ordinary course of business,
(D) Management Guarantees,
(E) Agent Guarantees in an aggregate principal amount not exceeding
$10.0 million outstanding at any time, or
(F) the financing of insurance premiums in the ordinary course of
business;
(9) Indebtedness of a Receivables Subsidiary secured by a Lien on all or
part of the assets disposed of in, or otherwise incurred in connection with,
a Financing Disposition, which Indebtedness is, except for Standard
Receivables Obligations, otherwise without recourse to North American Van
Lines or any Restricted Subsidiary of North American Van Lines (other than
any Receivables Subsidiary);
(10) Indebtedness of a Foreign Subsidiary if, on the date of Incurrence
of such Indebtedness, after giving effect to the Incurrence thereof,
(A) the Consolidated Coverage Ratio would be at least 2.25:1.00 and
(B) if, as a result of such Incurrence, such Foreign Subsidiary shall
then become subject to any restriction or limitation (under any
agreement or instrument governing such Indebtedness) on its
ability to pay dividends or make other distributions to North
American Van Lines, the Foreign Subsidiary Coverage Ratio would
be greater than 2.75:1.00;
provided, that if such Indebtedness is not incurred pursuant to the
preceding clause (B), such Indebtedness shall not be amended, modified or
otherwise supplemented such that such Foreign Subsidiary will become subject
to any such restriction or limitation referred to in such clause unless such
Indebtedness could then be Incurred pursuant to such clause; and any
Refinancing Indebtedness with respect to any such Indebtedness;
(11) Indebtedness of North American Van Lines or any Restricted
Subsidiary in an aggregate principal amount at any time outstanding (giving
effect to any refinancing thereof) not exceeding an amount equal to
$45.0 million.
(c) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant,
(1) any other obligation of the obligor on such Indebtedness (or of any
other Person who could have Incurred such Indebtedness under this covenant)
arising under any Guarantee, Lien or letter of credit, bankers' acceptance
or other similar instrument or obligation supporting such Indebtedness shall
be disregarded to the extent that such Guarantee, Lien or letter of credit,
bankers' acceptance or other similar instrument or obligation secures the
principal amount of such Indebtedness;
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(2) in the event that Indebtedness meets the criteria of more than one
of the types of Indebtedness described in paragraph (b) above, North
American Van Lines, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses; and
(3) the amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
(d) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred, in the case of term
Indebtedness, or first committed, in the case of revolving credit Indebtedness,
provided that
(1) the Dollar-equivalent principal amount of any such Indebtedness
outstanding on the Issue Date shall be calculated based on the relevant
currency exchange rate in effect on the Issue Date,
(2) if such Indebtedness is Incurred to refinance other Indebtedness
denominated in a foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at
the relevant currency exchange rate in effect on the date of such
refinancing, such Dollar-denominated restriction shall be deemed not to have
been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced and
(3) the Dollar-equivalent principal amount of Indebtedness denominated
in a foreign currency and Incurred pursuant to the Senior Credit Facility
shall be calculated based on the relevant currency exchange rate in effect
on, at North American Van Lines' option,
(A) the Issue Date,
(B) any date on which any of the respective commitments under the
Senior Credit Facility shall be reallocated between or among
facilities or subfacilities thereunder, or on which such rate is
otherwise calculated for any purpose thereunder, or
(C) the date of such Incurrence.
The principal amount of any Indebtedness Incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
LIMITATION ON LAYERING. North American Van Lines shall not Incur any
Indebtedness that is expressly subordinated in right of payment to any Senior
Indebtedness of North American Van Lines, unless such Indebtedness so Incurred
ranks PARI PASSU in right of payment with the notes, or is subordinated in right
of payment to the notes. No Note Guarantor shall Incur any Indebtedness that is
expressly subordinated in right of payment to any Guarantor Senior Indebtedness
of such Note Guarantor, unless such Indebtedness so Incurred ranks PARI PASSU in
right of payment with such Note Guarantor's Note Guarantee, or is subordinated
in right of payment to such Note Guarantor's Note Guarantee. Unsecured
Indebtedness is not deemed to be subordinate or junior to secured Indebtedness
merely because it is unsecured, and Indebtedness that is not guaranteed by a
particular Person is not deemed to be subordinate or junior to Indebtedness that
is so guaranteed merely because it is not so guaranteed.
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LIMITATION ON RESTRICTED PAYMENTS. (a) North American Van Lines shall not,
and shall not permit any Restricted Subsidiary, directly or indirectly, to
(1) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any such payment in connection with
any merger or consolidation to which North American Van Lines or any
Restricted Subsidiary is a party) except
(x) dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and
(y) dividends or distributions payable to North American Van
Lines or any Restricted Subsidiary
(and, in the case of any such Restricted Subsidiary making such dividend or
distribution, to other holders of its Capital Stock on no more than a pro
rata basis, measured by value),
(2) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of North American Van Lines held by Persons other than North American
Van Lines or a Restricted Subsidiary,
(3) purchase, repurchase, redeem, defease or otherwise acquire or retire
for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment, any Subordinated Obligations (other than a purchase,
redemption, defeasance or other acquisition or retirement for value in
anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of such
acquisition or retirement) or
(4) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition or retirement or Investment being herein
referred to as a "Restricted Payment"), if at the time North American Van
Lines or such Restricted Subsidiary makes such Restricted Payment:
(x) a Default shall have occurred and be continuing (or would result
therefrom);
(y) North American Van Lines could not incur at least an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described
under "--Limitation on Indebtedness"; or
(z) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
as determined in good faith by the Board of Directors, whose
determination shall be conclusive) declared or made subsequent to the
Issue Date and then outstanding would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from September 30, 1999 to the
end of the most recent fiscal quarter ending prior to the date of
such Restricted Payment for which consolidated financial
statements of North American Van Lines are available (or, in case
such Consolidated Net Income shall be a negative number, 100% of
such negative number);
(B) the aggregate Net Cash Proceeds and the fair market value of
Qualified Proceeds received (X) by North American Van Lines as
capital contributions to North American Van Lines after the Issue
Date or from the issuance or sale (other than to a Restricted
Subsidiary) of its Capital Stock (other than Disqualified Stock)
after the Issue Date or (Y) by North American Van Lines or any
Restricted Subsidiary from the issuance and sale by North
American Van Lines or any Restricted Subsidiary after the Issue
Date of Indebtedness that shall have been converted into or
exchanged for Capital Stock of North American Van Lines (other
than Disqualified Stock), PLUS the amount of cash and the fair
market value of Qualified Proceeds received by North American Van
Lines or any Restricted Subsidiary upon such conversion or
exchange;
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(C) the aggregate amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from
(1) dividends, distributions, interest payments, return of
capital, repayments of Investments or other transfers of assets
to North American Van Lines or any Restricted Subsidiary from any
Unrestricted Subsidiary (in each case, in the form of cash, Cash
Equivalents or Qualified Proceeds), or
(2) the redesignation of any Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as provided in the
definition of "Investment"),
not to exceed in the case of any such Unrestricted Subsidiary the
aggregate amount of Investments (other than Permitted Investments)
made by North American Van Lines or any Restricted Subsidiary in
such Unrestricted Subsidiary after the Issue Date; and
(D) in the case of any disposition or repayment of any Investment (in
each case, in the form of cash, Cash Equivalents or Qualified
Proceeds) constituting a Restricted Payment (without duplication
of any amount deducted in calculating the amount of Investments
at any time outstanding included in the amount of Restricted
Payments), an amount in the aggregate equal to the lesser of the
return of capital, repayment or other proceeds with respect to
all such Investments and the initial amount of all such
Investments.
(b) The provisions of the foregoing paragraph (a) will not prohibit any of
the following (each, a "Permitted Payment"):
(1) any purchase, redemption, repurchase, defeasance or other
acquisition or retirement of Capital Stock of North American Van Lines or
Subordinated Obligations made by exchange (including any such exchange
pursuant to the exercise of a conversion right or privilege in connection
with which cash is paid in lieu of the issuance of fractional shares) for,
or out of the proceeds of the substantially concurrent issuance or sale of,
Capital Stock of North American Van Lines (other than Disqualified Stock and
other than Capital Stock issued or sold to a Subsidiary) or a substantially
concurrent capital contribution to North American Van Lines; provided, that
the Net Cash Proceeds from such issuance, sale or capital contribution shall
be excluded in subsequent calculations under clause (B) of the preceding
paragraph (a);
(2) any purchase, redemption, repurchase, defeasance or other
acquisition or retirement of Subordinated Obligations (x) made by exchange
for, or out of the proceeds of the substantially concurrent issuance or sale
of, Refinancing Indebtedness Incurred in compliance with the covenant
described under "--Limitation on Indebtedness"; (y) from Net Available Cash
to the extent permitted by the covenant described under "--Limitation on
Sales of Assets and Subsidiary Stock"; or (Z) to the extent required by the
agreement governing such Subordinated Obligations only following the
occurrence of a Change of Control Triggering Event (or, in the case of
Acquired Debt, any similar event), but only if in each case, North American
Van Lines shall have complied with the covenant described under "--Change of
Control" and, if required, purchased all notes tendered pursuant to the
offer to repurchase all the notes required thereby, prior to purchasing or
repaying such Subordinated Obligations;
(3) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with the
preceding paragraph (a);
(4) loans, advances, dividends or distributions by North American Van
Lines to Holding to permit Holding to repurchase or otherwise acquire its
Capital Stock (including any options, warrants or other rights in respect
thereof), or payments by North American Van Lines to repurchase or otherwise
acquire Capital Stock (including any options, warrants or other rights in
respect thereof), in each case from Management Investors, such payments,
loans, advances, dividends or distributions not
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to exceed an amount (net of repayments of any such loans or advances equal
to (A) $12.5 million PLUS (B) $2.5 million multiplied by the number of
calendar years that have commenced since the Issue Date PLUS (C) the Net
Cash Proceeds received by North American Van Lines since the Issue Date
from, or as a capital contribution from, the issuance or sale to Management
Investors of Capital Stock (including any options, warrants or other rights
in respect thereof), to the extent such Net Cash Proceeds are not included
in any calculation under clause (3)(B)(x) of the preceding paragraph (a);
(5) the payment by North American Van Lines of, or loans, advances,
dividends or distributions by North American Van Lines to Holding to pay,
dividends on the common stock or equity of North American Van Lines or
Holding following a public offering of such common stock or equity, in an
amount not to exceed in any fiscal year 6% of the aggregate gross proceeds
received by North American Van Lines in or from such public offering;
(6) Restricted Payments (including loans or advances) in an aggregate
amount outstanding at any time not to exceed $10.0 million (net of
repayments of any such loans or advances);
(7) loans, advances, dividends or distributions to Holding or other
payments by North American Van Lines or any Restricted Subsidiary (A) to
satisfy or permit Holding to satisfy obligations under the Management
Agreements, (B) pursuant to the Tax Sharing Agreement, or (C) to pay or
permit Holding to pay any Holding Expenses or any Related Taxes;
(8) payments by North American Van Lines, or loans, advances, dividends
or distributions by North American Van Lines to Holding to make payments, to
holders of Capital Stock of North American Van Lines or Holding in lieu of
issuance of fractional shares of such Capital Stock, not to exceed $100,000
in the aggregate outstanding at any time;
(9) the distribution, as a dividend or otherwise, of Investments in
Unrestricted Subsidiaries (with the exception of Investments in Unrestricted
Subsidiaries acquired pursuant to the definition of Permitted Investments
other than pursuant to clause (17) of such definition);
(10) the Transactions; and
(11) any purchase, redemption, retirement or other acquisition of Capital
Stock that may be deemed to occur upon exercise of stock options, warrants
or similar rights to the extent such Capital Stock represents all or part of
the exercise price thereof;
provided, that
(A) in the case of clauses (3) and (5), the net amount of any such
Permitted Payment shall be included in subsequent calculations of the amount
of Restricted Payments,
(B) in the case of clause (4), 50% of the amount of any such Permitted
Payment shall be included in subsequent calculations of the amount of
Restricted Payments,
(C) in all cases other than pursuant to clauses (A) and (B) immediately
above, the net amount of any such Permitted Payment shall be excluded in
subsequent calculations of the amount of Restricted Payments and
(D) with respect to clauses (5) and (6), no Default or Event of Default
shall have occurred or be continuing at the time of any such Permitted
Payment after giving effect thereto.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. North American Van Lines will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to
(A) pay dividends or make any other distributions on its Capital Stock or
pay any Indebtedness or other obligations owed to North American Van Lines,
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(B) make any loans or advances to North American Van Lines or
(C) transfer any of its property or assets to North American Van Lines,
except any encumbrance or restriction:
(1) pursuant to an agreement or instrument in effect at or entered
into on the Issue Date (including, without limitation, the Senior Credit
Facility), the indenture or the notes;
(2) pursuant to any agreement or instrument of a Person, or relating
to Indebtedness or Capital Stock of a Person, which Person is acquired by
or merged or consolidated with or into North American Van Lines or any
Restricted Subsidiary, or which agreement or instrument is assumed by
North American Van Lines or any Restricted Subsidiary in connection with
an acquisition of assets from such Person, as in effect at the time of
such acquisition, merger or consolidation (except to the extent that such
Indebtedness was incurred to finance, or otherwise in connection with,
such acquisition, merger or consolidation), provided that for purposes of
this clause (2), if another Person is the Successor Company, any
Subsidiary thereof or agreement or instrument of such Person or any such
Subsidiary shall be deemed acquired or assumed, as the case may be, by
North American Van Lines or a Restricted Subsidiary, as the case may be,
when such Person becomes the Successor Company;
(3) pursuant to an agreement or instrument (a "Refinancing
Agreement") effecting a refinancing of Indebtedness Incurred pursuant to,
or that otherwise extends, renews, refunds, refinances or replaces, an
agreement or instrument referred to in clause (1) or (2) of this covenant
or this clause (3) (an "Initial Agreement") or contained in any
amendment, supplement or other modification to an Initial Agreement (an
"Amendment"); provided, however, that the encumbrances and restrictions
contained in any such Refinancing Agreement or Amendment taken as a whole
are not materially less favorable to the holders of the notes than
encumbrances and restrictions contained in the Initial Agreement or
Initial Agreements to which such Refinancing Agreement or Amendment
relates (as determined in good faith by North American Van Lines);
(4) (a) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a
lease, license or similar contract, or the assignment or transfer of any
lease, license or other contract,
(b) by virtue of any transfer of, agreement to transfer, option
or right with respect to, or Lien on, any property or assets of North
American Van Lines or any Restricted Subsidiary not otherwise
prohibited by the indenture,
(c) contained in mortgages, pledges or other security agreements
securing Indebtedness of a Restricted Subsidiary to the extent
restricting the transfer of the property or assets subject thereto,
(d) pursuant to customary provisions restricting dispositions of
real property interests set forth in any reciprocal easement
agreements of North American Van Lines or any Restricted Subsidiary,
(e) pursuant to Purchase Money Obligations that impose
encumbrances or restrictions on the property or assets so acquired,
(f) on cash or other deposits or net worth imposed by customers
under agreements entered into in the ordinary course of business,
(g) pursuant to customary provisions contained in agreements and
instruments entered into in the ordinary course of business
(including but not limited to leases and joint venture and other
similar agreements entered into in the ordinary course of business)
or
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(h) that arises or is agreed to in the ordinary course of
business and does not detract from the value of property or assets of
North American Van Lines or any Restricted Subsidiary in any manner
material to North American Van Lines or such Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary (or any of its property
or assets) imposed pursuant to an agreement entered into for the direct
or indirect sale or disposition of all or substantially all the Capital
Stock or assets of such Restricted Subsidiary (or the property or assets
that are subject to such restriction) pending the closing of such sale or
disposition;
(6) required by any applicable law, rule, regulation or order or by
any regulatory authority having jurisdiction over North American Van
Lines or any Restricted Subsidiary or any of their businesses; or
(7) pursuant to an agreement or instrument (A) relating to any
Indebtedness permitted to be Incurred subsequent to the Issue Date
pursuant to the provisions of the covenant described under "--Limitation
on Indebtedness," if North American Van Lines determines in good faith
that the encumbrances and restrictions contained in the agreements and
instruments relating to such Indebtedness, taken as a whole, are not
materially less favorable to the holders of the notes than encumbrances
and restrictions contained in the agreements and instruments referred to
in clause (1) of this covenant, (B) relating to Indebtedness of a Foreign
Subsidiary incurred pursuant to clause (b)(1) or (b)(10) of the covenant
described under "--Limitation on Indebtedness," (C) relating to a sale of
accounts receivable by a Foreign Subsidiary on customary terms (as
determined in good faith by North American Van Lines) or (D) relating to
Indebtedness of or a Financing Disposition to or by any Receivables
Entity.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) North American Van
Lines will not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless
(1) North American Van Lines or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person
assuming responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the fair market value
of the shares and assets subject to such Asset Disposition, as such fair
market value may be determined (and shall be determined, to the extent such
Asset Disposition or any series of related Asset Dispositions involves
aggregate consideration in excess of $10.0 million) in good faith by the
Board of Directors, whose determination shall be conclusive (including as to
the value of all noncash consideration),
(2) in the case of any Asset Disposition (or series of related Asset
Dispositions) at least 75% of the consideration therefor (excluding, in the
case of an Asset Disposition (or series of related Asset Dispositions) of
assets, any consideration by way of relief from, or by any other Person
assuming responsibility for, any liabilities, contingent or otherwise, that
are not Indebtedness) received by North American Van Lines or such
Restricted Subsidiary is in the form of (a) cash, or (b) Designated Noncash
Assets having an aggregate fair market value, taken together with all other
Designated Noncash Assets received in consideration for Asset Dispositions
pursuant to this clause (b) that are at the time outstanding, not to exceed
the greater of (x) 5% of Consolidated Tangible Assets and
(y) $35.0 million at the time of receipt of such Designated Noncash Assets;
and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by North American Van Lines (or any Restricted
Subsidiary, as the case may be) as follows:
(A) FIRST, either
(X) to the extent North American Van Lines elects (or is required
by the terms of any Senior Indebtedness or Indebtedness of a
Restricted Subsidiary), to prepay, repay or purchase Senior
Indebtedness or such Indebtedness of a Restricted Subsidiary (in each
case
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other than Indebtedness owed to North American Van Lines or a
Restricted Subsidiary) within 365 days after the date of such Asset
Disposition, or
(Y) to the extent North American Van Lines or such Restricted
Subsidiary elects, to reinvest in Additional Assets (including by
means of an investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by North American Van
Lines or another Restricted Subsidiary) within 365 days from the date
of such Asset Disposition;
(B) SECOND, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A) above (such balance, the
"Excess Proceeds"), to make an offer to purchase notes and (to the extent
North American Van Lines or such Restricted Subsidiary elects, or is
required by the terms thereof) to purchase, redeem or repay any other
Senior Subordinated Indebtedness or Guarantor Senior Subordinated
Indebtedness, pursuant and subject to the conditions of the indenture and
the agreements governing such other Indebtedness; and
(C) THIRD, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B) above, to fund
(to the extent consistent with any other applicable provision of the
indenture) any general corporate purpose (including but not limited to
the repurchase, repayment or other acquisition or retirement of any
Subordinated Obligations);
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A)(x) or (B) above, North American Van Lines
or such Restricted Subsidiary will retire such Indebtedness and will cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, North American
Van Lines and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this covenant except to the extent that the
aggregate Net Available Cash from all Asset Dispositions that is not applied in
accordance with this covenant exceeds $15.0 million. If the aggregate principal
amount of notes, Senior Subordinated Indebtedness and Guarantor Senior
Subordinated Indebtedness validly tendered and not withdrawn (or otherwise
subject to purchase, redemption or repayment) in connection with an offer
pursuant to clause (B) above exceeds the Excess Proceeds, the Excess Proceeds
will be apportioned between the notes and such Senior Subordinated Indebtedness
and Guarantor Senior Subordinated Indebtedness, with the portion of the Excess
Proceeds payable in respect of the notes to equal the lesser of:
(x) the Excess Proceeds amount multiplied by a fraction, the numerator
of which is the outstanding principal amount of the notes and the
denominator of which is the sum of the outstanding principal amount of the
notes and the outstanding principal amount of the relevant Senior
Subordinated Indebtedness and Guarantor Senior Subordinated Indebtedness,
and
(y) the aggregate principal amount of notes validly tendered and not
withdrawn.
For the purposes of clause (2) of paragraph (a) above, the following are
deemed to be cash:
(1) Temporary Cash Investments and Cash Equivalents,
(2) the assumption of Indebtedness of North American Van Lines (other
than Disqualified Stock of North American Van Lines) or any Restricted
Subsidiary and the release of North American Van Lines or such Restricted
Subsidiary from all liability on payment of the principal amount of such
Indebtedness in connection with such Asset Disposition,
(3) Indebtedness of any Restricted Subsidiary that is no longer a
Restricted Subsidiary as a result of such Asset Disposition, to the extent
that North American Van Lines and each other
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Restricted Subsidiary are released from any Guarantee of payment of the
principal amount of such Indebtedness in connection with such Asset
Disposition,
(4) securities received by North American Van Lines or any Restricted
Subsidiary from the transferee that are converted by North American Van
Lines or such Restricted Subsidiary into cash within 180 days after the
consummation of such Asset Disposition and
(5) consideration consisting of outstanding Indebtedness of North
American Van Lines or a Restricted Subsidiary which is then retired.
(b) In the event of an Asset Disposition that requires the purchase of notes
pursuant to clause (3)(B) of paragraph (a) above, North American Van Lines will
be required to purchase notes tendered pursuant to an offer by North American
Van Lines for the notes (the "Offer") at a purchase price of 100% of their
principal amount plus accrued and unpaid interest to the Purchase Date in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the indenture. If the aggregate purchase price of
the notes tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of notes, the remaining Net Available Cash will be
available to North American Van Lines for use in accordance with clause (3)(B)
of paragraph (a) above (to repay Senior Subordinated Indebtedness or Guarantor
Senior Subordinated Indebtedness) or clause (3)(C) of paragraph (a) above. North
American Van Lines shall not be required to make an Offer for notes pursuant to
this covenant if the Net Available Cash available therefor (after application of
the proceeds as provided in clause (3)(A) of paragraph (a) above) is less than
$15.0 million for any particular Asset Disposition (which lesser amounts shall
be carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
(c) North American Van Lines will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, North American Van Lines
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this covenant by virtue thereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) North American Van Lines
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of North American Van Lines (an
"Affiliate Transaction") unless
(1) the terms of such Affiliate Transaction are not materially less
favorable to North American Van Lines or such Restricted Subsidiary, as the
case may be, than those that could be obtained at the time in a transaction
with a Person who is not such an Affiliate and
(2) if such Affiliate Transaction involves aggregate consideration in
excess of $10.0 million, the terms of such Affiliate Transaction have been
approved by a majority of the Disinterested Directors.
For purposes of this paragraph, any Affiliate Transaction shall be deemed to
have satisfied the requirements set forth in this paragraph if (X) such
Affiliate Transaction is approved by a majority of the Disinterested Directors
or (Y) in the event there are no Disinterested Directors, a fairness opinion is
provided by a nationally recognized appraisal or investment banking firm with
respect to such Affiliate Transaction.
(b) The provisions of the preceding paragraph (a) will not apply to:
(1) any Restricted Payment Transaction,
(2) (A) the entering into, maintaining or performance of any employment
contract, collective bargaining agreement, benefit plan, program or
arrangement, related trust agreement or any
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other similar arrangement for or with any employee, officer or director
heretofore or hereafter entered into in the ordinary course of business,
including vacation, health, insurance, deferred compensation, severance,
retirement, savings or other similar plans, programs or arrangements,
(B) the payment of compensation, performance of indemnification or
contribution obligations, or any issuance, grant or award of stock,
options, other equity-related interests or other securities, to
employees, officers or directors in the ordinary course of business,
(C) the payment of fees to directors of North American Van Lines or
any of its Subsidiaries,
(D) any transaction with an officer or director in the ordinary
course of business not involving more than $100,000 in any one case, or
(E) Management Advances and payments in respect thereof,
(3) any transaction with North American Van Lines, any Restricted
Subsidiary, or any Receivables Entity,
(4) any transaction arising out of agreements or instruments in
existence on the Issue Date, and any payments made pursuant thereto,
(5) execution, delivery and performance of the Tax Sharing Agreement and
Management Agreements, including (A) payment to CDR or any Affiliate of CDR
of a fee of $5.0 million plus out-of-pocket expenses in connection with the
Transactions, and (B) payment to CDR or any Affiliate of CDR of fees of up
to $1.0 million in any fiscal year plus all out-of-pocket expenses incurred
by CDR or any such Affiliate in connection with its performance of
management consulting, monitoring, financial advisory or other services with
respect to North American Van Lines and its Restricted Subsidiaries,
(6) the Transactions, all transactions in connection therewith
(including but not limited to the financing thereof), and all fees or
expenses paid or payable in connection with the Transactions,
(7) any transaction in the ordinary course of business on terms not
materially less favorable to North American Van Lines or the relevant
Restricted Subsidiary than those that could be obtained at the time in a
transaction with a Person who is not an Affiliate of North American Van
Lines, and
(8) any transaction in the ordinary course of business, or approved by a
majority of the Board of Directors, between North American Van Lines or any
Restricted Subsidiary and any Affiliate of North American Van Lines
controlled by North American Van Lines that is a joint venture or similar
entity.
LIMITATION ON LIENS. North American Van Lines shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, create or permit to
exist any Lien (other than Permitted Liens) on any of its property or assets
(including Capital Stock of any other Person), whether owned on the date of the
indenture or thereafter acquired, securing any Indebtedness of North American
Van Lines or any Note Guarantor that by its terms is expressly subordinated in
right of payment to or ranks PARI PASSU in right of payment with the notes or
such Note Guarantor's Note Guarantee (the "Initial Lien"), unless
contemporaneously therewith effective provision is made to secure the
Indebtedness due under the indenture and the notes or, in respect of Liens on
any Restricted Subsidiary's property or assets, any Note Guarantee of such
Restricted Subsidiary, equally and ratably with such obligation for so long as
such obligation is so secured by such Initial Lien. Any such Lien thereby
created in favor of the notes or any such Note Guarantee will be automatically
and unconditionally released and discharged upon
(1) the release and discharge of the Initial Lien to which it relates,
or
(2) any sale, exchange or transfer to any Person not an Affiliate of
North American Van Lines of the property or assets secured by such Initial
Lien, or of all of the Capital Stock held by North
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American Van Lines or any Restricted Subsidiary in, or all or substantially
all the assets of, any Restricted Subsidiary creating such Lien.
FUTURE NOTE GUARANTORS. After the Issue Date, North American Van Lines will
cause each Domestic Subsidiary that guarantees payment by North American Van
Lines of Bank Indebtedness of North American Van Lines to execute and deliver to
the trustee a supplemental indenture or other instrument pursuant to which such
Subsidiary will guarantee payment of the notes, whereupon such Subsidiary will
become a Note Guarantor for all purposes under the indenture. In addition, North
American Van Lines may cause any Subsidiary that is not a Note Guarantor so to
guarantee payment of the notes and become a Note Guarantor.
Each Note Guarantor, as primary obligor and not merely as surety, will
jointly and severally, irrevocably and fully and unconditionally Guarantee, on a
senior subordinated basis, the punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all monetary obligations of North
American Van Lines under the indenture and the notes, whether for principal of
or interest on the notes, expenses, indemnification or otherwise (all such
obligations guaranteed by such Note Guarantors being herein called the
"Guaranteed Obligations"). Such Note Guarantor will agree to pay, in addition to
the amount stated above, any and all reasonable out-of-pocket expenses
(including reasonable counsel fees and expenses) incurred by the trustee or the
holders in enforcing any rights under its Note Guarantee.
The obligations of each Note Guarantor will be limited to the maximum
amount, as will, after giving effect to all other contingent and fixed
liabilities of such Note Guarantor, result in the obligations of such Note
Guarantor under the Note Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under applicable law, or being void or unenforceable under
any applicable law, including any law relating to insolvency of debtors.
Each such Note Guarantee shall be a continuing Guarantee and shall:
(1) remain in full force and effect until payment in full of the
principal amount of all outstanding notes (whether by payment at maturity,
purchase, redemption, defeasance, retirement or other acquisition) and all
other Guaranteed Obligations then due and owing, unless earlier terminated
as described below,
(2) be binding upon such Note Guarantor and
(3) inure to the benefit of and be enforceable by the trustee, the
holders and their permitted successors, transferees and assigns.
Notwithstanding the preceding paragraph, any Note Guarantor will
automatically and unconditionally be released from all obligations under its
Note Guarantee, and such Note Guarantee shall thereupon terminate and be
discharged and of no further force or effect,
(1) concurrently with any sale or disposition (by merger or otherwise)
of any Note Guarantor or any interest therein in accordance with the terms
of the indenture (including the covenant described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock") by North
American Van Lines or a Restricted Subsidiary, following which such Note
Guarantor is no longer a Restricted Subsidiary of North American Van Lines,
(2) pursuant to the terms of its Note Guarantee,
(3) at any time that such Note Guarantor is released from all of its
obligations under all of its Guarantees of payment by North American Van
Lines of Bank Indebtedness of North American Van Lines,
(4) upon the merger or consolidation of any Note Guarantor with and into
North American Van Lines or another Note Guarantor that is the surviving
Person in such merger or consolidation,
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(5) upon legal or covenant defeasance of North American Van Lines'
obligations, or satisfaction and discharge of the indenture, or
(6) subject to customary contingent reinstatement provisions, upon
payment in full of the aggregate principal amount of all notes then
outstanding and all other Guaranteed Obligations then due and owing.
In addition, North American Van Lines will have the right, upon 30 days' notice
to the trustee, to cause any Note Guarantor that has not guaranteed payment by
North American Van Lines of any Bank Indebtedness of North American Van Lines to
be unconditionally released from all obligations under its Note Guarantee, and
such Note Guarantee shall thereupon terminate and be discharged and of no
further force or effect. Upon any such occurrence specified in this paragraph,
the trustee shall execute any documents reasonably required in order to evidence
such release, discharge and termination in respect of such Note Guarantee.
Neither North American Van Lines nor any such Note Guarantor shall be
required to make a notation on the notes to reflect any such Guarantee or any
such release, termination or discharge.
SEC REPORTS. Notwithstanding that North American Van Lines may not be
required to be or remain subject to the reporting requirements of Section 13(a)
or 15(d) of the Exchange Act, North American Van Lines will file with the SEC
(unless such filing is not permitted under the Exchange Act or by the SEC), so
long as notes are outstanding, the annual reports, information, documents and
other reports that North American Van Lines is required to file with the
Commission pursuant to such Section 13(a) or 15(d) or would be so required to
file if North American Van Lines were so subject. North American Van Lines will
also, within 15 days after the date on which North American Van Lines was so
required to file or would be so required to file if North American Van Lines
were so subject (or, if later, 120 days after the Issue Date), transmit by mail
to all holders, as their names and addresses appear in the Note Register, and to
the trustee copies of any such information, documents and reports (without
exhibits) so required to be filed (or, in lieu of one or more of the annual
reports for the fiscal year ended December 25, 1999 and the quarterly reports
for the following fiscal year, a registration statement filed with the SEC under
the Securities Act or any amendment thereto, provided such registration
statement or amendment contains the information that would have been included in
each such report). North American Van Lines will be deemed to have satisfied
such requirements if Holding files and provides reports, documents and
information of the types otherwise so required, in each case within the
applicable time periods, and North American Van Lines is not required to file
such reports, documents and information separately under the applicable rules
and regulations of the SEC (after giving effect to any exemptive relief) because
of the filings by Holding. North American Van Lines also will comply with the
other provisions of TIA Section 314(a).
MERGER AND CONSOLIDATION
North American Van Lines will not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") will be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not North American Van Lines) will expressly
assume all the obligations of North American Van Lines under the notes and
the indenture by executing and delivering to the trustee a supplemental
indenture or one or more other documents or instruments in form reasonably
satisfactory to the trustee;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness that becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the time
of such transaction), no Default will have occurred and be continuing;
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(3) immediately after giving effect to such transaction, the Successor
Company could Incur at least $1.00 of additional Indebtedness pursuant to
paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness";
(4) each Note Guarantor (other than any party to any such consolidation
or merger) shall have delivered a supplemental indenture or other document
or instrument in form reasonably satisfactory to the trustee, confirming its
Note Guarantee; and
(5) North American Van Lines will have delivered to the trustee an
Officer's Certificate and an Opinion of Counsel, each to the effect that
such consolidation, merger or transfer complies with the provisions
described in this paragraph, provided that (x) in giving such opinion such
counsel may rely on an Officer's Certificate as to compliance with the
foregoing clauses (2) and (3) and as to any matters of fact, and (y) no
Opinion of Counsel will be required for a consolidation, merger or transfer
described in the last paragraph of this covenant.
Any Indebtedness that becomes an obligation of North American Van Lines or any
Restricted Subsidiary (or that is deemed to be Incurred by any Restricted
Subsidiary that becomes a Restricted Subsidiary) as a result of any such
transaction undertaken in compliance with this covenant, and any Refinancing
Indebtedness with respect thereto, shall be deemed to have been Incurred in
compliance with the covenant described under "--Certain Covenants--Limitation on
Indebtedness."
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, North American Van Lines under the indenture,
and thereafter the predecessor Company shall be relieved of all obligations and
covenants under the indenture.
Clauses (2) and (3) of the first paragraph of this "Merger and
Consolidation" section will not apply to any transaction in which
(a) any Restricted Subsidiary consolidates with, merges into or
transfers all or part of its assets to North American Van Lines or
(b) North American Van Lines consolidates or merges with or into or
transfers all or substantially all its properties and assets to (X) an
Affiliate incorporated or organized for the purpose of reincorporating or
reorganizing North American Van Lines in another jurisdiction or changing
its legal structure to a corporation or other entity or (Y) a Restricted
Subsidiary of North American Van Lines so long as all assets of North
American Van Lines and the Restricted Subsidiaries immediately prior to such
transaction (other than Capital Stock of such Restricted Subsidiary) are
owned by such Restricted Subsidiary and its Restricted Subsidiaries
immediately after the consummation thereof.
DEFAULTS
An Event of Default is defined in the indenture as:
(1) a default in any payment of interest on any note when due, continued
for 30 days,
(2) a default in the payment of principal of any note when due, whether
at its Stated Maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise, whether or not such payment is prohibited by
the provisions described under "--Ranking" above,
(3) the failure by North American Van Lines to comply for 30 days after
notice with its obligations under the covenant described under "--Merger and
Consolidation" above,
(4) the failure by North American Van Lines to comply for 30 days after
notice with any of its obligations under the covenant described under
"--Change of Control" above (other than a failure to purchase notes),
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(5) the failure by North American Van Lines to comply for 60 days after
notice with its other agreements contained in the notes or the indenture,
(6) the failure by any Note Guarantor to comply for 45 days after notice
with its obligations under its Note Guarantee,
(7) the failure by North American Van Lines or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default, if the total amount of such Indebtedness so
unpaid or accelerated exceeds $15.0 million or its foreign currency
equivalent (the "cross acceleration provision"),
(8) certain events of bankruptcy, insolvency or reorganization of North
American Van Lines or a Significant Subsidiary (the "bankruptcy
provisions"),
(9) the rendering of any judgment or decree for the payment of money in
an amount (net of any insurance or indemnity payments actually received in
respect thereof prior to or within 90 days from the entry thereof, or to be
received in respect thereof in the event any appeal thereof shall be
unsuccessful) in excess of $15.0 million or its foreign currency equivalent
against North American Van Lines or a Significant Subsidiary that is not
discharged, or bonded or insured by a third Person, if such judgment or
decree remains outstanding for a period of 90 days following such judgment
or decree and is not discharged, waived or stayed (the "judgment default
provision"),
(10) the failure of any Note Guarantee by a Note Guarantor that is a
Significant Subsidiary to be in full force and effect (except as
contemplated by the terms thereof or of the indenture) or the denial or
disaffirmation in writing by any Note Guarantor that is a Significant
Subsidiary of its obligations under its Note Guarantee, if such Default
continues for 10 days, or
(11) the failure of Holding to consummate the Holding Stock Issuance on
or before December 31, 1999.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a Default under clause (3), (4), (5) or (6) will not constitute an
Event of Default until the trustee or the holders of at least 25% in principal
amount of the outstanding notes notify North American Van Lines of the Default
and North American Van Lines does not cure such Default within the time
specified in such clause after receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of North American Van Lines) occurs and
is continuing, the trustee by notice to North American Van Lines, or the holders
of at least a majority in principal amount of the outstanding notes by notice to
North American Van Lines and the trustee, may declare the principal of and
accrued but unpaid interest on all the notes to be due and payable, provided
that so long as any Bank Indebtedness shall be outstanding, such acceleration
shall not be effective until the earlier to occur of:
(x) five Business Days following delivery of a written notice of such
acceleration of the notes to North American Van Lines and the holders of all
Bank Indebtedness or each Representative thereof and
(y) the acceleration of any Bank Indebtedness. Upon the effectiveness of
such a declaration, such principal and interest will be due and payable
immediately.
Notwithstanding the foregoing, if an Event of Default relating to certain events
of bankruptcy, insolvency or reorganization of North American Van Lines occurs
and is continuing, the principal of and accrued interest on all the notes will
become immediately due and payable without any declaration or other act on
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the part of the trustee or any holders. Under certain circumstances, the holders
of a majority in principal amount of the outstanding notes may rescind any such
acceleration with respect to the notes and its consequences.
Notwithstanding the foregoing, in the event of a declaration of acceleration
in respect of the notes because an Event of Default specified in clause (7)
above shall have occurred and be continuing, such declaration of acceleration of
the notes and such Event of Default and all consequences thereof (including
without limitation any acceleration or resulting payment default) shall be
annulled, waived and rescinded, automatically and without any action by the
trustee or the holders, and be of no further effect, if within 60 days after
such Event of Default arose
(x) the Indebtedness that is the basis for such Event of Default has
been discharged, or
(y) the holders thereof have rescinded or waived the acceleration,
notice or action (as the case may be) giving rise to such Event of Default,
or
(z) the default in respect of such Indebtedness that is the basis for
such Event of Default has been cured.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders unless such holders
have offered to the trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal or interest when due, no holder may pursue any remedy with respect to
the indenture or the notes unless
(a) such holder has previously given the trustee written notice that an
Event of Default is continuing,
(b) holders of at least 25% in principal amount of the outstanding notes
have requested the trustee in writing to pursue the remedy,
(c) such holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense,
(d) the trustee has not complied with such request within 60 days after
the receipt of the request and the offer of security or indemnity and
(e) the holders of a majority in principal amount of the outstanding
notes have not given the trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or of
exercising any trust or power conferred on the trustee. The trustee, however,
may refuse to follow any direction that conflicts with law or the indenture or
that the trustee determines is unduly prejudicial to the rights of any other
holder or that would involve the trustee in personal liability. Prior to taking
any action under the indenture, the trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
The indenture provides that if a Default occurs and is continuing and is
known to the trustee, the trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, or premium (if any) or interest on, any note, the trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding notice is in the interests of the noteholders.
In addition, North American Van Lines is required to deliver to the trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. North American Van Lines also is required to deliver to the
trustee, within 30 days after the occurrence thereof, written notice of any
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event that would constitute certain Defaults, their status and what action North
American Van Lines is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture may be amended with the consent
of the holders of a majority in principal amount of the notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the notes then
outstanding (including in each case, consents obtained in connection with a
tender offer or exchange offer for notes). However, without the consent of each
holder of an outstanding note affected, no amendment or waiver may
(1) reduce the principal amount of notes whose holders must consent to
an amendment or waiver,
(2) reduce the rate of or extend the time for payment of interest on any
note,
(3) reduce the principal of or extend the Stated Maturity of any note,
(4) reduce the premium payable upon the redemption of any note or change
the date on which any note may be redeemed as described under "Optional
Redemption" above,
(5) make any note payable in money other than that stated in the note,
(6) make any change to the subordination provisions of the indenture
that adversely affects the rights of any holder in any material respect,
(7) impair the right of any holder to receive payment of principal of
and interest on such holder's notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's notes or
(8) make any change in the amendment or waiver provisions described in
this sentence.
Without the consent of any holder, North American Van Lines, the trustee and
(as applicable) any Note Guarantor may amend the indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor of the obligations of North American Van Lines under the indenture, to
provide for uncertificated notes in addition to or in place of certificated
notes, to add Guarantees with respect to the notes, to secure the notes, to
confirm and evidence the release, termination or discharge of any Guarantee or
Lien with respect to or securing the notes when such release, termination or
discharge is provided for under the indenture, to add to the covenants of North
American Van Lines for the benefit of the noteholders or to surrender any right
or power conferred upon North American Van Lines, to provide that any
Indebtedness that becomes or will become an obligation of the Successor Company
or a Note Guarantor pursuant to a transaction governed by the provisions
described under "--Merger and Consolidation" (and that is not a Subordinated
Obligation) is Senior Subordinated Indebtedness or Guarantor Senior Subordinated
Indebtedness for purposes of the indenture, to provide for or confirm the
issuance of Additional Notes, to make any change that does not adversely affect
the rights of any holder, or to comply with any requirement of the SEC in
connection with the qualification of the indenture under the TIA or otherwise.
However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior Indebtedness
then outstanding (which Senior Indebtedness has been previously designated in
writing by North American Van Lines to the trustee for this purpose) unless the
holders of such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
The consent of the noteholders is not necessary under the indenture to
approve the particular form of any proposed amendment or waiver. It is
sufficient if such consent approves the substance of the proposed
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amendment or waiver. Until an amendment or waiver becomes effective, a consent
to it by a noteholder is a continuing consent by such noteholder and every
subsequent holder of all or part of the related note. Any such noteholder or
subsequent holder may revoke such consent as to its note by written notice to
the trustee or North American Van Lines, received thereby before the date on
which North American Van Lines certifies to the trustee that the holders of the
requisite principal amount of notes have consented to such amendment or waiver.
After an amendment or waiver under the indenture becomes effective, North
American Van Lines is required to mail to noteholders a notice briefly
describing such amendment or waiver. However, the failure to give such notice to
all noteholders, or any defect therein, will not impair or affect the validity
of the amendment or waiver.
DEFEASANCE
North American Van Lines at any time may terminate all its obligations under
the notes and the indenture ("legal defeasance"), except for certain
obligations, including those relating to the defeasance trust and obligations to
register the transfer or exchange of the notes, to replace mutilated, destroyed,
lost or stolen notes and to maintain a registrar and paying agent in respect of
the notes. North American Van Lines at any time may terminate its obligations
under certain covenants under the indenture, including the covenants described
under "--Certain Covenants" and "--Change of Control," the operation of the
default provisions relating to such covenants described under "--Defaults"
above, the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Subsidiaries and the judgment default provision
described under "--Defaults" above, and the limitations contained in clauses
(3), (4) and (5) under "--Merger and Consolidation" above ("covenant
defeasance"). If North American Van Lines exercises its legal defeasance option
or its covenant defeasance option, each Note Guarantor will be released from all
of its obligations with respect to its Note Guarantee.
North American Van Lines may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. If North
American Van Lines exercises its legal defeasance option, payment of the notes
may not be accelerated because of an Event of Default with respect thereto. If
North American Van Lines exercises its covenant defeasance option, payment of
the notes may not be accelerated because of an Event of Default specified in
clause (4), (5) (as it relates to the covenants described under "--Certain
Covenants" above), (6), (7), (8) (but only with respect to events of bankruptcy,
insolvency or reorganization of a Significant Subsidiary), (9) or (10) under
"Defaults" above or because of the failure of North American Van Lines to comply
with clause (3), (4) or (5) under "--Merger and Consolidation" above.
Either defeasance option may be exercised to any redemption date or to the
maturity date for the notes. In order to exercise either defeasance option,
North American Van Lines must irrevocably deposit in trust (the "defeasance
trust") with the trustee money or U.S. Government Obligations, or a combination
thereof, for the payment of principal of, and premium (if any) and interest on,
the notes to redemption or maturity, as the case may be, and must comply with
certain other conditions, including delivery to the trustee of an Opinion of
Counsel to the effect that holders of the notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law since the Issue
Date).
SATISFACTION AND DISCHARGE
The indenture will be discharged and cease to be of further effect (except
as to surviving rights of registration of transfer or exchange of the notes, as
expressly provided for in the indenture) as to all outstanding notes when
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(1) either
(a) all the notes previously authenticated and delivered (other than
certain lost, stolen or destroyed notes, and certain notes for which
provision for payment was previously made and thereafter the funds have
been released to North American Van Lines) have been delivered to the
trustee for cancellation or
(b) all notes previously delivered to the trustee for cancellation
(X) have become due and payable, (Y) will become due and payable at their
Stated Maturity within one year or (Z) are to be called for redemption
within one year under arrangements reasonably satisfactory to the trustee
for the giving of notice of redemption by the trustee in the name, and at
the expense, of North American Van Lines;
(2) North American Van Lines has irrevocably deposited or caused to be
deposited with the trustee money, U.S. Government Obligations, or a
combination thereof, sufficient to pay and discharge the entire indebtedness
on the notes not previously delivered to the trustee for cancellation, for
principal, premium, if any, and interest to the date of deposit (in the case
of notes that have become due and payable) or to the Stated Maturity or
redemption date, as the case may be;
(3) North American Van Lines has paid or caused to be paid all other
sums payable under the indenture by North American Van Lines; and
(4) North American Van Lines has delivered to the trustee an Officer's
Certificate and an Opinion of Counsel each to the effect that all conditions
precedent under the "Satisfaction and Discharge" section of the indenture
relating to the satisfaction and discharge of the indenture have been
complied with, provided that any such counsel may rely on any Officer's
Certificate as to matters of fact (including as to compliance with the
foregoing clauses (1), (2) and (3)).
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
STOCKHOLDERS
No director, officer, employee, incorporator, member or stockholder, as
such, of North American Van Lines, Holding, any Note Guarantor or any Subsidiary
of any thereof shall have any liability for any obligation of North American Van
Lines, Holding or any Note Guarantor under the indenture, the notes or any Note
Guarantee, or for any claim based on, in respect of, or by reason of, any such
obligation or its creation. Each noteholder, by accepting the notes, waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the notes.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company is the trustee under the indenture and
has been appointed by North American Van Lines as Registrar and Paying Agent
with regard to the notes.
The indenture will provide that, except during the continuance of an Event
of Default, the trustee will perform only such duties as are set forth
specifically in the indenture. During the existence of an Event of Default, the
trustee will exercise such of the rights and powers vested in it under the
indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The indenture and the TIA will impose certain limitations on the rights of
the trustee, should it become a creditor of North American Van Lines, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The trustee is
permitted to engage in other transactions; provided, that if it acquires any
conflicting interest as described in the TIA, it must eliminate such conflict,
apply to the SEC for permission to continue as trustee with such conflict, or
resign.
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GOVERNING LAW
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to any principles of conflict of laws to the extent that the application
of the law of another jurisdiction would be required thereby.
BOOK-ENTRY, DELIVERY AND FORM
The notes will be represented by one or more notes in registered, global
form deposited with the trustee as custodian for the Depository Trust Company
("DTC") and registered in the name of Cede & Co. as nominee of DTC, in each case
for credit to the accounts of DTC participants and indirect participants (each
as described below) including, without limitation, Morgan Guaranty Trust Company
of New York, Brussels office, as operator (the "Euroclear Operator") of the
Euroclear System and Cedelbank.
Except in the limited circumstances set forth below, notes in certificated
form will not be issued.
DEPOSITARY PROCEDURES
DTC has advised North American Van Lines as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for persons who have accounts with it ("DTC participants") and to
facilitate the clearance and settlement of securities transactions between DTC
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. DTC participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC participant, either directly or indirectly
("indirect participants").
DTC has advised North American Van Lines that pursuant to procedures
established by it,
(1) upon initial deposit of a global note, DTC will credit the accounts
of DTC participants with portions of the principal amount of such global
note deposited,
(2) for DTC participants, initial ownership of interests in such global
note will be shown on, and the transfer of ownership thereof will be
effected through, records maintained by DTC and
(3) for non-DTC participant owners, ownership interests in such global
note will only be shown on, and the transfer of ownership thereof will only
be effected through, the records of the DTC participants, including
Euroclear and Cedelbank, or others through which they hold their account.
All interests in a global note deposited with DTC, including those held through
Euroclear and Cedelbank, are subject to the procedures and requirements of DTC.
Those interests held through Euroclear are also subject to the procedures and
requirements of such system.
Except as described below, owners of interests in any global note will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders of notes for any purpose. So long as DTC (or its nominee) is the
registered owner or holder of a global note, such party will be considered the
sole owner or holder of the notes represented by such global note for all
purposes under the indenture and the notes. Accordingly, each person owning a
beneficial interest in a global note must rely on the procedures of DTC and its
participants to exercise any rights and remedies of a holder of notes under the
indenture. Payments of
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principal and interest on any global note will be made to DTC or its nominee as
the registered owners thereof.
The laws of some countries and some states in the United States require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer beneficial interests in a global
note to such persons may be limited to that extent. Because DTC can act only on
behalf of its participants, the ability of a person having beneficial interests
in a global note to pledge such interests to persons or entities that do not
participate in the relevant clearing system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests.
PAYMENTS ON THE GLOBAL NOTES
Payments in respect of the principal of, and premium, if any, and interest
on a global note will be made through a payment agent appointed pursuant to the
indenture and will be payable to DTC (or its nominee) in its capacity as the
registered holder of such notes under the indenture. Under the terms of the
indenture, the Issuer and the trustee will treat the persons in whose names the
notes, including the global notes, are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, none of North American Van Lines, the trustee, or any
agent of North American Van Lines or the trustee has or will have any
responsibility or liability for (1) any aspect or accuracy of the records of the
relevant clearing system, the participants therein or the account holders
thereof, as the case may be, relating to payments made on account of beneficial
ownership interests in the global notes, or for maintaining, supervising or
reviewing any records of such clearing system, participant or account holder
relating to beneficial ownership interests in the global notes, or (2) any other
matter relating to the actions and practices of the relevant clearing system or
the participants therein or the account holders thereof.
North American Van Lines understands that DTC, upon receipt of any such
payment, will immediately credit the accounts of its relevant participants with
payments in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant global note, as shown on the
records of DTC. North American Van Lines expects that payments by such
participants to the beneficial owners of global notes will be governed by
standing instructions and customary practices and will be the responsibility of
such participants. Neither North American Van Lines nor the trustee will have
responsibility or liability for the payment of amounts owing in respect of
beneficial interests in the global notes held by DTC.
TRANSFERS OF GLOBAL SECURITIES AND INTERESTS THEREIN
Unless definitive securities are issued, a global note may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee.
Transfers of beneficial interests in the global notes will be subject to the
applicable rules and procedures of DTC and its direct and indirect participants
(including, if applicable, those of Euroclear and Cedelbank), which are subject
to change from time to time. Any secondary market trading activity in beneficial
interests in the global notes is expected to occur through the participants of
DTC, and the securities custody accounts of investors are expected to be
credited with their holdings against payment in same-day funds on the settlement
date.
No service charge will be made for any registration of transfer or exchange
of notes, but the trustee or North American Van Lines may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Although DTC has agreed to certain procedures to facilitate transfers of
interests in the global notes among participants in DTC, it is under no
obligation to perform or to continue to perform such
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procedures, and such procedures may be discontinued at any time. None of North
American Van Lines, the trustee, nor any agent of North American Van Lines or
the trustee will have any responsibility for the nonperformance or
misperformance (as a result of insolvency, mistake, misconduct or otherwise) by
DTC, or its participants or indirect participants, of their respective
obligations under the rules and procedures governing their operations.
North American Van Lines understands that under existing industry practices,
if either North American Van Lines or the trustee requests any action of holders
of notes, or if an owner of a beneficial interest in a global note desires to
give instructions or take an action that a holder is entitled to give or take
under the indenture, DTC would authorize its participants owning the relevant
beneficial interest to give such instructions or take such action, and such
participants would authorize indirect participants to give such instructions or
take such action, or would otherwise act upon the instructions of such indirect
participants.
North American Van Lines understands that under existing practices of DTC,
if less than all of the respective class of notes are to be redeemed at any
time, DTC will credit its participants' accounts on a proportionate basis (with
adjustments to prevent fractions) or by lot or on such other basis as DTC deems
fair and appropriate, provided that no beneficial interests of less than $1,000
may be redeemed in part.
CERTIFICATED NOTES
Beneficial interests in a global note are exchangeable for definitive notes
in registered certificated form only if
(1) DTC (a) notifies North American Van Lines that it is unwilling or
unable to continue as depositary for such global note or (b) has ceased to
be a "clearing agency" registered under the Exchange Act and, in each case,
North American Van Lines thereupon is unable to locate a qualified successor
depositary within 90 days;
(2) North American Van Lines, at its option, notifies the trustee in
writing that it elects to cause the issuance of notes in definitive form
under the indenture; or
(3) upon the occurrence of certain other events.
In all cases, certificated notes delivered in exchange for any global note or
beneficial interest therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of DTC in accordance with its
customary procedures. The notes may not be issued in bearer form.
In the case of the issuance of certificated notes in the limited
circumstances set forth above, the holder of any such certificated note may
transfer such note by surrendering it at the offices or agencies of North
American Van Lines maintained for such purpose within the City and State of New
York. Until otherwise designated by North American Van Lines, North American Van
Lines' office or agency in the City and State of New York will be the office of
an affiliate of the trustee maintained for such purpose. In the event of a
partial transfer of a holding of notes represented by one certificate, or
partial redemption of such a holding represented by one certificate, a new
certificate shall be issued to the transferee in respect of the part transferred
or redeemed and a further new certificate in respect of the balance of the
holding not transferred or redeemed shall be issued to the transferor, provided
that no certificate in denominations less than $1,000 shall be issued.
North American Van Lines shall not be required to register the transfer or
exchange of certificated notes for a period of 15 days preceding (a) the due
date for any payment of principal of or interest on the notes or (b) a selection
of notes to be redeemed. Also, North American Van Lines is not required to
register the transfer or exchange of any notes selected for redemption. In the
event of the transfer of any certificated note, the trustee may require a
holder, among other things, to furnish appropriate
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endorsements and transfer documents, and North American Van Lines may require a
holder to pay any taxes and fees required by law and permitted by the indenture
and the notes.
If certificated notes are issued and a holder of a certificated note claims
that the note has been lost, destroyed or wrongfully taken or if such note is
mutilated and is surrendered to the trustee, North American Van Lines shall
issue and the trustee shall authenticate a replacement note if the trustee's and
North American Van Lines' requirements are met. If required by the trustee or
North American Van Lines, an indemnity bond sufficient in the judgment of both
to protect North American Van Lines, the trustee and any paying agent or
authenticating agent appointed pursuant to the indenture from any loss which any
of them may suffer if a note is replaced must be posted. North American Van
Lines may charge for its expenses in replacing a note.
In case any such mutilated, destroyed, lost or stolen note has become or is
about to become due and payable, or is about to be redeemed or purchased by
North American Van Lines pursuant to the provisions of the indenture, North
American Van Lines in its discretion may, instead of issuing a new note, pay,
redeem or purchase such note, as the case may be.
REGISTRATION RIGHTS
The following summary of certain provisions of the registration rights
agreement does not contain all of the information that may be important to an
investor in the notes. It is subject to, and is qualified in its entirety by
reference to, all the provisions of the registration rights agreement. A copy of
the registration rights agreement is available as set forth under the heading
"Where You Can Find More Information."
Pursuant to the registration rights agreement, North American Van Lines has
agreed to use its commercially reasonable best efforts to file a registration
statement for this exchange offer and to use all commercially reasonable efforts
to cause it to become effective. The registration statement of which this
prospectus is a part constitutes the registration statement to be filed pursuant
to the registration rights agreement.
If, as a result of a change in law or interpretations of the staff of the
SEC North American Van Lines is not permitted to effect the exchange offer, or
if any holder of the notes (other than the initial purchasers, an affiliate of
North American Van Lines or a noteholder that cannot make required
representations) is not permitted by applicable law to participate in, or to
receive the benefit of, the exchange offer, North American Van Lines will use
its reasonable best efforts to file a shelf registration statement with respect
to resales of old notes or new notes, as the case may be, and to cause the shelf
registration statement to be declared effective under the Securities Act within
270 days after the Issue Date. After such shelf registration statement is
declared effective, North American Van Lines will use its reasonable best
efforts to keep the shelf registration statement in effect until the earlier of
two years from the Issue Date (or one year in the case of a shelf registration
effected at the request of the initial purchasers) or such shorter period that
will terminate when all the old notes or new notes covered by the shelf
registration statement (1) have been sold pursuant thereto or (2) are
distributed to the public pursuant to Rule 144 or become eligible for resale
pursuant to Rule 144 without volume restriction, if any. Under certain
circumstances, North American Van Lines may suspend the availability of the
shelf registration statement for certain periods of time.
North American Van Lines will, in the event a shelf registration statement
is filed, among other things, provide to each holder for whom such shelf
registration statement was filed copies of the prospectus that is a part of the
shelf registration statement, notify each such holder when the shelf
registration statement has become effective and take certain other actions as
are required to permit unrestricted resales of the old notes or the new notes,
as the case may be. A holder of notes selling such notes pursuant to the shelf
registration statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by certain
provisions of
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the registration rights agreement (including certain indemnification
obligations). In addition, each such holder of notes will be required, among
other things, to deliver information to be used in connection with the shelf
registration statement within the time periods set forth in the registration
rights agreement in order to benefit from the provisions regarding additional
interest set forth in the following paragraph.
If the exchange offer is not consummated on or before the 240th day after
the original issue date of the old notes or, if a shelf registration statement
is required to be filed, such shelf registration statement is not declared
effective by the SEC with respect to the old notes on or before the 270th day
after the original issue date of the old notes, the interest rate borne for such
old notes will be increased by 0.25% per annum. This additional interest will
increase by 0.25% per annum every twelve weeks thereafter, but will not exceed
0.50% per annum in the aggregate in any event. This additional interest will
accrue until the exchange offer is consummated or the shelf registration
statement is declared effective.
CERTAIN DEFINITIONS
"Acquired Debt" means Indebtedness of any Person that is assumed by North
American Van Lines or any Restricted Subsidiary in connection with its
acquisition of assets from such Person or any Affiliate thereof or is issued and
outstanding on or prior to the date on which such Person was acquired by North
American Van Lines or any Restricted Subsidiary or merged or consolidated with
or into North American Van Lines or any Restricted Subsidiary (other than
Indebtedness Incurred to finance, or otherwise in connection with or in
contemplation of, such acquisition).
"Additional Assets" means
(1) any property or assets that replace the property or assets that are
the subject of an Asset Disposition;
(2) any property or assets (other than Indebtedness and Capital Stock)
to be used by North American Van Lines or a Restricted Subsidiary in a
Related Business;
(3) the Capital Stock of a Person that is engaged in a Related Business
and becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by North American Van Lines or another Restricted Subsidiary;
or
(4) Capital Stock of any Person that at such time is a Restricted
Subsidiary, acquired from a third party.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any moving or storage company or contractor, or other Person,
that provides sales, packing, warehousing, hauling or other services in
connection with the ordinary course of business or operations of North American
Van Lines or any of its Subsidiaries, or any Affiliate of any such Agent.
"Agent Guarantee" means any Guarantee by North American Van Lines or any
Restricted Subsidiary of Indebtedness or other obligations of any Agent, entered
into in accordance with the indenture.
"all or substantially all" has the meaning given to such phrase in the
Revised Model Business Corporation Act and commentary thereto.
"Allied Acquisition" means the acquisition of Capital Stock and/or assets of
certain Subsidiaries of NFC plc engaged in moving services businesses pursuant
to the Acquisition Agreement dated as of September 14, 1999 between Holding and
NFC plc, and the other transactions contemplated thereby.
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"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares, or (in the case of a Foreign Subsidiary) to the extent
required by applicable law), property or other assets (each referred to for the
purposes of this definition as a "disposition") by North American Van Lines or
any of its Restricted Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction), other than
(1) a disposition to North American Van Lines or a Restricted
Subsidiary,
(2) a disposition in the ordinary course of business,
(3) the sale or discount (with or without recourse, and on customary or
commercially reasonable terms) of accounts receivable or notes receivable
arising in the ordinary course of business, or the conversion or exchange of
accounts receivable for notes receivable,
(4) any Restricted Payment Transaction,
(5) a disposition that is governed by the provisions described under
"--Merger and Consolidation,"
(6) any Financing Disposition,
(7) any "fee in lieu" or other disposition of assets to any governmental
authority or agency that continue in use by North American Van Lines or any
Restricted Subsidiary, so long as North American Van Lines or any Restricted
Subsidiary may obtain title to such assets upon reasonable notice by paying
a nominal fee,
(8) any exchange of like property pursuant to Section 1031 (or any
successor section) of the Code,
(9) any financing transaction with respect to property built or acquired
by North American Van Lines or any Restricted Subsidiary after the Issue
Date, including without limitation any sale/ leaseback transaction or asset
securitization,
(10) any disposition arising from foreclosure, condemnation or similar
action with respect to any property or other assets,
(11) any disposition of Capital Stock, Indebtedness or other securities
of an Unrestricted Subsidiary,
(12) a disposition of Capital Stock of a Restricted Subsidiary pursuant
to an agreement or other obligation with or to a Person (other than North
American Van Lines or a Restricted Subsidiary) from whom such Restricted
Subsidiary was acquired, or from whom such Restricted Subsidiary acquired
its business and assets (having been newly formed in connection with such
acquisition), entered into in connection with such acquisition,
(13) a disposition of not more than 5% of the outstanding Capital Stock
of a Foreign Subsidiary to one or more members of the management of such
Foreign Subsidiary that has been approved by the Board of Directors, or
(14) any disposition or series of related dispositions for aggregate
consideration not to exceed $2.5 million.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by
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(2) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable under or in respect of the Senior
Credit Facility, including without limitation principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to North American Van Lines or any
Restricted Subsidiary whether or not a claim for post-filing interest is allowed
in such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees, other monetary obligations of any nature and all other amounts
payable thereunder or in respect thereof.
"Board of Directors" means the board of directors or other governing body of
North American Van Lines or, if North American Van Lines is owned or managed by
a single entity, the board of directors or other governing body of such entity,
or, in either case, any committee thereof duly authorized to act on behalf of
such board or governing body.
"Borrowing Base" means 85% of accounts receivables of North American Van
Lines and its Restricted Subsidiaries (determined in accordance with GAAP as of
the end of the most recently ended fiscal quarter for which consolidated
financial statements of North American Van Lines are available).
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to close
in New York City.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The Stated Maturity of any Capitalized Lease
Obligation shall be the date of the last payment of rent or any other amount due
under the related lease.
"Cash Equivalents" means any of the following:
(a) securities issued or fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof,
(b) time deposits, certificates of deposit or bankers' acceptances of
(1) any lender under the Senior Credit Agreement or (2) any commercial bank
having capital and surplus in excess of $500,000,000 and the commercial
paper of the holding company of which is rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (or if at such time neither is issuing ratings, then a comparable
rating of another nationally recognized rating agency),
(c) commercial paper rated at least A-l or the equivalent thereof by S&P
or at least P-1 or the equivalent thereof by Moody's (or if at such time
neither is issuing ratings, then a comparable rating of another nationally
recognized rating agency) and
(d) investments in money market funds complying with the risk limiting
conditions of Rule 2a-7 or any successor rule of the SEC under the
Investment Company Act of 1940, as amended.
"CDR" means Clayton, Dubilier & Rice, Inc.
"CDR Fund V" means Clayton, Dubilier & Rice Fund V Limited Partnership, a
Cayman Islands exempted limited partnership, and any successor in interest
thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means North American Van Lines, Inc., a Delaware corporation, and
any successor in interest thereto.
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"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of Consolidated EBITDA of North American Van
Lines and its Restricted Subsidiaries for the period of the most recent four
consecutive fiscal quarters ending prior to the date of such determination for
which consolidated financial statements of North American Van Lines are
available to (y) Consolidated Interest Expense for such four fiscal quarters (in
each case, determined, for each fiscal quarter (or portion thereof) of the four
fiscal quarters ending prior to the Issue Date, on a pro forma basis to give
effect to the Allied Acquisition as if it had occurred at the beginning of such
four-quarter period); provided, that
(1) if since the beginning of such period North American Van Lines or
any Restricted Subsidiary has Incurred any Indebtedness that remains
outstanding on such date of determination or if the transaction giving rise
to the need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of
such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date of
such calculation shall be computed based on (A) the average daily balance of
such Indebtedness during such four fiscal quarters or such shorter period
for which such facility was outstanding or (B) if such facility was created
after the end of such four fiscal quarters, the average daily balance of
such Indebtedness during the period from the date of creation of such
facility to the date of such calculation),
(2) if since the beginning of such period North American Van Lines or
any Restricted Subsidiary has repaid, repurchased, redeemed, defeased or
otherwise acquired, retired or discharged any Indebtedness (each, a
"Discharge") or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a Discharge of Indebtedness (in each
case other than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid), Consolidated EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Discharge of such Indebtedness,
including with the proceeds of such new Indebtedness, as if such Discharge
had occurred on the first day of such period,
(3) if since the beginning of such period North American Van Lines or
any Restricted Subsidiary shall have disposed of any company, any business
or any group of assets constituting an operating unit of a business (any
such disposition, a "Sale"), the Consolidated EBITDA for such period shall
be reduced by an amount equal to the Consolidated EBITDA (if positive)
attributable to the assets that are the subject of such Sale for such period
or increased by an amount equal to the Consolidated EBITDA (if negative)
attributable thereto for such period and Consolidated Interest Expense for
such period shall be reduced by an amount equal to
(A) the Consolidated Interest Expense attributable to any Indebtedness of
North American Van Lines or any Restricted Subsidiary repaid,
repurchased, redeemed, defeased or otherwise acquired, retired or
discharged with respect to North American Van Lines and its
continuing Restricted Subsidiaries in connection with such Sale for
such period (including but not limited to through the assumption of
such Indebtedness by another Person)
plus
(B) if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period attributable to the
Indebtedness of such Restricted Subsidiary to the extent North
American Van Lines and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such Sale,
(4) if since the beginning of such period North American Van Lines or
any Restricted Subsidiary (by merger, consolidation or otherwise) shall have
made an Investment in any Person that thereby becomes a Restricted
Subsidiary, or otherwise acquired any company, any business or any group of
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assets constituting an operating unit of a business, including any such
Investment or acquisition occurring in connection with a transaction causing
a calculation to be made hereunder (any such Investment or acquisition, a
"Purchase"), Consolidated EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any related Indebtedness) as if such Purchase occurred on
the first day of such period, and
(5) if since the beginning of such period any Person became a Restricted
Subsidiary or was merged or consolidated with or into North American Van
Lines or any Restricted Subsidiary, and since the beginning of such period
such Person shall have Discharged any Indebtedness or made any Sale or
Purchase that would have required an adjustment pursuant to clause (2),
(3) or (4) above if made by North American Van Lines or a Restricted
Subsidiary during such period, Consolidated EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Discharge, Sale or Purchase occurred on the first day of
such period.
For purposes of this definition, whenever pro forma effect is to be given to
any Sale, Purchase or other transaction, or the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness Incurred or repaid, repurchased, redeemed, defeased or
otherwise acquired, retired or discharged in connection therewith, the pro forma
calculations in respect thereof may include anticipated cost savings relating to
any such Sale, Purchase or other transaction that North American Van Lines
reasonably believes in good faith could have been achieved during the relevant
four quarter period as a result of such Sale, Purchase or other transaction
(PROVIDED that both (1) such cost savings were identified and quantified in an
Officer's Certificate delivered to the trustee at the time of the consummation
of such transaction and (2) with respect to each such transaction completed
prior to the 90th day preceding the relevant date of determination, actions were
commenced or initiated by North American Van Lines within 90 days of the
consummation of such transaction to effect such cost savings identified in such
Officer's Certificate and with respect to any other transaction, such Officer's
Certificate sets forth the specific steps to be taken within the 90 days after
the consummation of such transaction to accomplish such cost savings). If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness). If any Indebtedness bears, at the option of North American
Van Lines or a Restricted Subsidiary, a rate of interest based on a prime or
similar rate, a eurocurrency interbank offered rate or other fixed or floating
rate, and such Indebtedness is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated by applying such optional rate
as North American Van Lines or such Restricted Subsidiary may designate. If any
Indebtedness that is being given pro forma effect was Incurred under a revolving
credit facility, the interest expense on such Indebtedness shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period. Interest on a Capitalized Lease Obligation shall be deemed to accrue at
an interest rate determined in good faith by a responsible financial or
accounting officer of North American Van Lines to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income:
(1) provision for all taxes (whether or not paid, estimated or accrued)
based on income, profits or capital,
(2) Consolidated Interest Expense,
(3) depreciation, amortization (including but not limited to
amortization of goodwill and intangibles and amortization and write-off of
financing costs) and all other non-cash charges or non-cash losses,
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(4) any expenses or charges related to any Equity Offering, Investment
or Indebtedness permitted by the indenture (whether or not consummated or
incurred) and
(5) the amount of any minority interest expense.
To the extent Consolidated EBITDA would otherwise include the amount of any
Receivables Fees excluded from Consolidated Interest Expense pursuant to
clause (3) of the definition of Consolidated Interest Expense, Consolidated
EBITDA shall be reduced by such amount.
"Consolidated Interest Expense" means, for any period,
(1) the total interest expense of North American Van Lines and its
Restricted Subsidiaries to the extent deducted in calculating Consolidated
Net Income, net of any interest income of North American Van Lines and its
Restricted Subsidiaries, including without limitation any such interest
expense consisting of
(a) interest expense attributable to Capitalized Lease Obligations,
(b) amortization of debt discount,
(c) interest in respect of Indebtedness of any other Person that has
been Guaranteed by North American Van Lines or any Restricted
Subsidiary of North American Van Lines (other than Indebtedness
Guaranteed under any Management Guarantee or Agent Guarantee,
except to the extent the interest thereon is actually being paid
by North American Van Lines or a Restricted Subsidiary thereof),
(d) non-cash interest expense,
(e) the interest portion of any deferred payment obligation, and
(f) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
plus
(2) dividends paid in cash in respect of Disqualified Stock of North
American Van Lines or a Restricted Subsidiary or in respect of Preferred
Stock of a Restricted Subsidiary of North American Van Lines and
minus
(3) to the extent otherwise included in such interest expense referred
to in clause (1) above, Receivables Fees and amortization or write-off of
financing costs,
in each case under clauses (1) through (3) as determined on a Consolidated basis
in accordance with GAAP; provided, that gross interest expense shall be
determined after giving effect to any net payments made or received by North
American Van Lines and its Restricted Subsidiaries with respect to Interest Rate
Agreements.
"Consolidated Net Income" means, for any period, the net income (loss) of
North American Van Lines and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP and before any reduction in respect
of Preferred Stock dividends; provided, that there shall not be included in such
Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained
in clause (4) below, North American Van Lines' equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount actually distributed by such Person during
such period to North American Van Lines or a Restricted Subsidiary of North
American Van Lines as a dividend or other distribution
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(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary of North American Van Lines, to the limitations contained in
clause (3) below) and (B) North American Van Lines' equity in the net loss
of such Person shall be included to the extent of the aggregate Investment
of North American Van Lines or any of its Restricted Subsidiaries in such
Person,
(2) any net income (loss) of any Person acquired by North American Van
Lines or a Restricted Subsidiary of North American Van Lines in a pooling of
interests transaction for any period prior to the date of such acquisition,
(3) any net income (loss) of any Restricted Subsidiary of North American
Van Lines if such Restricted Subsidiary is subject to restrictions, directly
or indirectly, on the payment of dividends or the making of similar
distributions by such Restricted Subsidiary, directly or indirectly, to
North American Van Lines by operation of the terms of such Restricted
Subsidiary's charter or any agreement, instrument, judgment, decree, order,
statute or governmental rule or regulation applicable to such Restricted
Subsidiary or its stockholders (other than (x) restrictions that have been
waived or otherwise released, (y) restrictions pursuant to the notes or the
indenture and (z) restrictions in effect on the Issue Date with respect to a
Restricted Subsidiary and other restrictions with respect to such Restricted
Subsidiary that taken as a whole are not materially less favorable to the
noteholders than such restrictions in effect on the Issue Date), except that
(A) subject to the limitations contained in clause (4) below, North American
Van Lines' equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of any dividend or distribution that was or that could have
been made by such Restricted Subsidiary during such period to North American
Van Lines or another Restricted Subsidiary of North American Van Lines
(subject, in the case of a dividend that could have been made to another
Restricted Subsidiary, to the limitation contained in this clause) and
(B) the net loss of such Restricted Subsidiary shall be included to the
extent of the aggregate Investment of North American Van Lines or any of its
other Restricted Subsidiaries in such Restricted Subsidiary,
(4) any gain or loss realized upon the sale or other disposition of any
asset of North American Van Lines or any Restricted Subsidiary of North
American Van Lines (including pursuant to any sale/ leaseback transaction)
that is not sold or otherwise disposed of in the ordinary course of business
(as determined in good faith by the Board of Directors),
(5) any item classified as an extraordinary, unusual or nonrecurring
gain, loss or charge (including without limitation (a) any compensation
expense for stock options that will be cashed out, converted, exchanged or
otherwise retired in connection with the Allied Acquisition, (b) any charge
or expense incurred for employee bonuses in connection with the Allied
Acquisition, and (c) fees, expenses and charges associated with the Allied
Acquisition or any acquisition, merger or consolidation after the Issue
Date),
(6) the cumulative effect of a change in accounting principles,
(7) all deferred financing costs written off and premiums paid in
connection with any early extinguishment of Indebtedness,
(8) any unrealized gains or losses in respect of Currency Agreements,
(9) any unrealized foreign currency transaction gains or losses in
respect of Indebtedness of any Person denominated in a currency other than
the functional currency of such Person, and
(10) any non-cash compensation charge arising from any grant of stock,
stock options or other equity based awards.
In the case of any unusual or nonrecurring gain, loss or charge not included
in Consolidated Net Income pursuant to clause (5) above in any determination
thereof, North American Van Lines will deliver
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an Officer's Certificate to the trustee promptly after the date on which
Consolidated Net Income is so determined, setting forth the nature and amount of
such unusual or nonrecurring gain, loss or charge.
"Consolidated Tangible Assets" means, as of any date of determination, the
total assets less the total intangible assets (including, without limitation,
goodwill) shown on the consolidated balance sheet of North American Van Lines
and its Restricted Subsidiaries as of the most recent date for which such a
balance sheet is available, determined on a consolidated basis in accordance
with GAAP (and, in the case of any determination relating to any Incurrence of
Indebtedness or any Investment, on a pro forma basis including any property or
assets being acquired in connection therewith).
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of North American Van Lines in accordance
with GAAP; provided that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary, but the interest of North American Van
Lines or any Restricted Subsidiary in any Unrestricted Subsidiary will be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Facilities" means, one or more of (x) the Senior Credit Facility and
(y) other facilities or arrangements, in each case with one or more banks or
other institutions providing for revolving credit loans, term loans, receivables
financings (including without limitation through the sale of receivables to such
institutions or to special purpose entities formed to borrow from such
institutions against such receivables), letters of credit or other Indebtedness,
in each case, including all agreements, instruments and documents executed and
delivered pursuant to or in connection with any of the foregoing, in each case
as the same may be amended, supplemented, waived or otherwise modified from time
to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original banks or other institutions or other banks or other
institutions or otherwise, and whether provided under any original Credit
Facility or one or more other credit agreements, indentures, financing
agreements or other Credit Facilities or otherwise). Without limiting the
generality of the foregoing, the term "Credit Facility" shall include any
agreement
(1) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
(2) adding Subsidiaries of North American Van Lines as additional
borrowers or guarantors thereunder,
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder or
(4) otherwise altering the terms and conditions thereof.
"Currency Agreement" means, in respect of a Person, any foreign exchange
contract, currency swap agreement or other similar agreement or arrangements
(including derivative agreements or arrangements), as to which such Person is a
party or a beneficiary.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Noncash Assets" means any non-cash consideration received by
North American Van Lines or one of its Restricted Subsidiaries in connection
with an Asset Disposition that is designated as Designated Noncash Assets
pursuant to an Officer's Certificate executed by the principal financial officer
of North American Van Lines or such Restricted Subsidiary. Such Officer's
Certificate shall state the basis of valuation of such consideration which shall
be the good faith determination of the Board of Directors. The fair market value
of each outstanding item of Designated Noncash Assets shall equal its value
measured at the time received and without giving effect to subsequent changes in
value, less the amount of cash or Cash Equivalents received upon any subsequent
sale or other disposition of any portion thereof; provided that such cash and
Cash Equivalents are applied in accordance with the covenant described under
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"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock," to
the extent required thereby.
"Designated Senior Indebtedness" means (1) the Bank Indebtedness and
(2) any other Senior Indebtedness that, at the date of determination, has an
aggregate principal amount equal to or under which, at the date of
determination, the holders thereof are committed to lend up to, at least
$25.0 million and is specifically designated by North American Van Lines in an
agreement or instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of the indenture.
"Disinterested Director" means, with respect to any Affiliate Transaction, a
member of the Board of Directors having no material direct or indirect financial
interest in or with respect to such Affiliate Transaction. A member of the Board
of Directors shall not be deemed to have such a financial interest by reason of
such member's holding Capital Stock of North American Van Lines or Holding or
any options, warrants or other rights in respect of such Capital Stock.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
(other than Management Stock) that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable or exercisable) or
upon the happening of any event
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock or
(3) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the 91st day following the final Stated
Maturity of the notes.
Notwithstanding the preceding sentence,
(a) any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require North American Van
Lines to repurchase such Capital Stock upon the occurrence of an event
described therein as a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide
that North American Van Lines may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "--Certain
Covenants--Limitation on Restricted Payments"; and
(b) any Capital Stock that would constitute Disqualified Stock solely
because such Capital Stock is issued pursuant to any plan for the benefit of
employees and may be required to be repurchased by North American Van Lines
in order to satisfy applicable regulatory obligations shall not constitute
Disqualified Stock.
"Domestic Subsidiary" means any Restricted Subsidiary of North American Van
Lines other than a Foreign Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing Disposition" means any sale, transfer, conveyance or other
disposition of property or assets by North American Van Lines or any Subsidiary
thereof to any Receivables Entity, or by any Receivables Subsidiary, in each
case in connection with the Incurrence by a Receivables Entity of Indebtedness,
or obligations to make payments to the obligor on Indebtedness, which may be
secured by a Lien in respect of such property or assets.
"Foreign Subsidiary" means
(a) any Restricted Subsidiary of North American Van Lines that is not
organized under the laws of the United States of America or any state
thereof or the District of Columbia and
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(b) any Restricted Subsidiary of North American Van Lines that has no
material assets other than securities of one or more Foreign Subsidiaries,
and other assets relating to an ownership interest in any such securities or
Subsidiaries.
"Foreign Subsidiary Coverage Ratio" as of any date of determination means
the ratio of
(1) the combined portion attributable to Foreign Subsidiaries, taken as
a whole, of the aggregate amount of Consolidated EBITDA of North American
Van Lines and its Restricted Subsidiaries for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such
determination for which consolidated financial statements of North American
Van Lines are available to
(2) the combined portion attributable to Foreign Subsidiaries, taken as
a whole, of Consolidated Interest Expense for such four fiscal quarters,
all calculated after giving effect to all intercompany eliminations applied in
preparing the relevant consolidated financial statements of North American Van
Lines (and without giving effect to clause (3) of the definition of the term
Consolidated Net Income as it relates to restrictions on the payment of
dividends or the making of similar distributions by any Foreign Subsidiary to
North American Van Lines or any Domestic Sudsidiary, but giving effect to such
clause as it relates to any such restrictions on the payment of dividends or the
making of similar distributions by any Foreign Subsidiary to another Foreign
Subsidiary), and otherwise in accordance with the definition of the term
"Coverage Ratio" (including but not limited to in accordance with all pro forma
and other adjustments provided for in such definition).
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date (for purposes of the definitions of
the terms "Consolidated Coverage Ratio," "Foreign Subsidiary Coverage Ratio,"
"Consolidated EBITDA," "Consolidated Interest Expense," "Consolidated Net
Income" and "Consolidated Tangible Assets," all defined terms in the indenture
to the extent used in or relating to any of the foregoing definitions, and all
ratios and computations based on any of the foregoing definitions) and as in
effect from time to time (for all other purposes of the indenture), including
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person; provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to any Note Guarantor,
the following obligations, whether outstanding on the date of the indenture or
thereafter issued, without duplication:
(a) any Guarantee of Bank Indebtedness by such Note Guarantor and all
other Guarantees by such Note Guarantor of Senior Indebtedness of North
American Van Lines or Guarantor Senior Indebtedness of any other Note
Guarantor;
(b) all obligations in respect of any Receivables Financing; and
(c) all obligations consisting of the principal of and premium, if any,
and accrued and unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Note Guarantor regardless of whether post-filing interest is allowed in such
proceeding) on, and fees and other amounts owing in respect of, all other
Indebtedness of the Note Guarantor, unless, in the instrument creating or
evidencing the same or pursuant to which the
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same is outstanding, it is expressly provided that the obligations in
respect of such Indebtedness are not senior in right of payment to the
obligations of such Note Guarantor under its Note Guarantee;
provided, however, that Guarantor Senior Indebtedness shall not include
(1) any obligations of such Note Guarantor to North American Van Lines
or any other Subsidiary of North American Van Lines,
(2) any liability for Federal, state, local, foreign or other taxes owed
or owing by such Note Guarantor,
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities),
(4) any Indebtedness of such Note Guarantor (or Guarantee by such Note
Guarantor of Indebtedness) that is expressly subordinated in right of
payment to any other Indebtedness of such Note Guarantor (or Guarantee by
such Note Guarantor of Indebtedness),
(5) any Capital Stock of such Note Guarantor or
(6) that portion of any Indebtedness of such Note Guarantor that is
Incurred by such Note Guarantor in violation of the covenant described under
"--Certain Covenants--Limitation on Indebtedness" (but no such violation
shall be deemed to exist for purposes of this clause (6) if any holder of
such Indebtedness or such holder's representative shall have received an
Officer's Certificate to the effect that such Incurrence of such
Indebtedness does not (or that the Incurrence by such Note Guarantor of the
entire committed amount thereof at the date on which the initial borrowing
thereunder is made would not) violate such covenant).
If any Guarantor Senior Indebtedness is disallowed, avoided or subordinated
pursuant to the provisions of Section 548 of Title 11 of the United States Code
or any applicable state fraudulent conveyance law, such Guarantor Senior
Indebtedness nevertheless will constitute Guarantor Senior Indebtedness.
"Guarantor Senior Subordinated Indebtedness" means, with respect to a Note
Guarantor, (1) the obligations of such Note Guarantor under its Note Guarantee
and (2) any other Indebtedness of such Note Guarantor that ranks PARI PASSU in
right of payment with the obligations of such Note Guarantor under its Note
Guarantee.
"Guarantor Subordinated Obligations" means, with respect to a Note
Guarantor, any Indebtedness of such Note Guarantor (whether outstanding on the
Issue Date or thereafter Incurred) that is expressly subordinated in right of
payment to the obligations of such Note Guarantor under the Note Guarantee
pursuant to a written agreement.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"holder" or "noteholder" means the Person in whose name a note is registered
in the Note Register.
"Holding" means NA Holding Corporation, a Delaware corporation, and any
successor in interest thereto.
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"Holding Expenses" means
(1) costs (including all professional fees and expenses) incurred by
Holding to comply with its reporting obligations under federal or state laws
or under the indenture or the Holding Notes, including any reports filed
with respect to the Securities Act, Exchange Act or the respective rules and
regulations promulgated thereunder,
(2) indemnification obligations of Holding owing to directors, officers,
employees or other Persons under its charter or by-laws or pursuant to
written agreements with any such Person,
(3) fees and expenses payable by Holding in connection with the
Transactions,
(4) other operational expenses of Holding incurred in the ordinary
course of business,
(5) expenses incurred by Holding in connection with any public offering
of Capital Stock or Indebtedness (X) where the net proceeds of such offering
are intended to be received by or contributed or loaned to North American
Van Lines or a Restricted Subsidiary, or (Y) in a prorated amount of such
expenses in proportion to the amount of such net proceeds intended to be so
received, contributed or loaned, or (Z) otherwise on an interim basis prior
to completion of such offering so long as Holding shall cause the amount of
such expenses to be repaid to North American Van Lines or the relevant
Restricted Subsidiary out of the proceeds of such offering promptly if
completed, and
(6) interest payments on the Holding Loan for any period or portion
thereof ending on or prior to December 31, 1999.
"Holding Loan" means $40.0 million in aggregate principal amount of
Indebtedness Incurred by Holding in connection with the Transactions.
"Holding Notes" means the senior discount notes due 2009 issued (or any
Indebtedness in lieu thereof Incurred) by Holding on the Issue Date, and any
refinancing in respect thereof, together with any agreement or instrument
evidencing, governing or otherwise relating to any of the foregoing.
"Holding Stock Issuance" means one or more issuances by Holding, subsequent
to the Issue Date, of Capital Stock of Holding for gross proceeds of not less
than $40.0 million in the aggregate.
"Incur" means issue, assume, enter into any Guarantee of, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. Accrual of interest, the
accretion of accreted value and the payment of interest in the form of
additional Indebtedness will not be deemed to be an Incurrence of Indebtedness.
Any Indebtedness issued at a discount (including Indebtedness on which interest
is payable through the issuance of additional Indebtedness) shall be deemed
Incurred at the time of original issuance of the Indebtedness at the initial
accreted amount thereof. The term "Incurrence" shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal of indebtedness of such Person for borrowed money,
(2) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(3) all reimbursement obligations of such Person in respect of letters of
credit or other similar instruments (the amount of such obligations being
equal at any time to the aggregate then undrawn and unexpired amount of
such letters of credit or other instruments plus the aggregate amount of
drawings thereunder that have not then been reimbursed),
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(4) all obligations of such Person to pay the deferred and unpaid purchase
price of property (except Trade Payables), which purchase price is due
more than one year after the date of placing such property in final
service or taking final delivery and title thereto,
(5) all Capitalized Lease Obligations of such Person,
(6) the redemption, repayment or other repurchase amount of such Person with
respect to any Disqualified Stock of such Person or (if such Person is a
Subsidiary of North American Van Lines other than a Note Guarantor) any
Preferred Stock of such Subsidiary, but excluding, in each case, any
accrued dividends (the amount of such obligation to be equal at any time
to the maximum fixed involuntary redemption, repayment or repurchase
price for such Capital Stock, or if less (or if such Capital Stock has no
such fixed price), to the involuntary redemption, repayment or repurchase
price therefor calculated in accordance with the terms thereof as if then
redeemed, repaid or repurchased, and if such price is based upon or
measured by the fair market value of such Capital Stock, such fair market
value shall be as determined in good faith by the Board of Directors or
the board of directors or other governing body of the issuer of such
Capital Stock),
(7) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of Indebtedness of such Person shall be the
lesser of (A) the fair market value of such asset at such date of
determination (as determined in good faith by North American Van Lines)
and (B) the amount of such Indebtedness of such other Persons,
(8) Guarantees of all Indebtedness of other Persons to the extent so
Guaranteed by such Person, and
(9) to the extent not otherwise included in this definition, net Hedging
Obligations of such Person (the amount of any such obligation to be equal
at any time to the termination value of such agreement or arrangement
giving rise to such Hedging Obligation that would be payable by such
Person at such time).
The amount of Indebtedness of any Person at any date shall be determined as
set forth above or otherwise provided in the indenture, or otherwise shall equal
the amount thereof that would appear on a balance sheet of such Person
(excluding any notes thereto) prepared in accordance with GAAP.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement (including derivative agreements or arrangements), as to which
such Person is party or a beneficiary.
"Inventory" means goods held for sale or lease by a Person in the ordinary
course of business, net of any reserve for goods that have been segregated by
such Person to be returned to the applicable vendor for credit, as determined in
accordance with GAAP.
"Investment" in any Person by any other Person means any direct or indirect
advance, loan or other extension of credit (other than to customers, suppliers,
Agents, directors, officers or employees of any Person in the ordinary course of
business) or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by, such Person. For purposes of the
definition of "Unrestricted Subsidiary" and the covenant described under
"--Certain Covenants--Limitation on Restricted Payments,"
(1) "Investment" shall include the portion (proportionate to North
American Van Lines' equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of North American Van Lines at the
time that such Subsidiary is designated an Unrestricted Subsidiary, provided
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
North American Van
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Lines shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (X) North
American Van Lines' "Investment" in such Subsidiary at the time of such
redesignation less (Y) the portion (proportionate to North American Van
Lines' equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation,
(2) property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, and
(3) in each case under clause (1) or (2) above, fair market value shall
be as determined in good faith by the Board of Directors. A Guarantee shall
not be deemed to be or give rise to an Investment until such Guarantee is
funded (in whole or in part).
The amount of any Investment outstanding at any time shall be the original cost
of such Investment, reduced (at North American Van Lines' option) by any
dividend, distribution, interest payment, return of capital, repayment or other
amount or value received in respect of such Investment; provided, that to the
extent that the amount of Restricted Payments outstanding at any time is so
reduced by any portion of any such amount or value that would otherwise be
included in the calculation of Consolidated Net Income, such portion of such
amount or value shall not be so included for purposes of calculating the amount
of Restricted Payments that may be made pursuant to paragraph (a) of the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments."
"Investors" means CDR Fund V.
"Issue Date" means the first date on which notes are issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Advances" means
(1) loans or advances made to directors, officers or employees of
Holding, North American Van Lines or any Restricted Subsidiary (x) in
respect of travel, entertainment or moving-related expenses incurred in the
ordinary course of business, (y) in respect of moving-related expenses
incurred in connection with any closing or consolidation of any facility, or
(z) in the ordinary course of business and (in the case of this clause (z))
not exceeding $2.5 million in the aggregate outstanding at any time,
(2) promissory notes of Management Investors acquired in connection with
the issuance of Management Stock to such Management Investors,
(3) loans to Management Investors of funds applied to purchase
Management Stock in an aggregate principal amount not exceeding
$10.0 million outstanding at any time (less the aggregate principal amount
of then outstanding borrowings by Management Investors then guaranteed by
North American Van Lines pursuant to clause (x) of the definition of
Management Guarantees),
(4) Management Guarantees, or
(5) other Guarantees of borrowings by Management Investors in connection
with the purchase of Management Stock, which Guarantees are permitted under
the covenant described under "--Certain Covenants--Limitation on
Indebtedness."
"Management Agreements" means, collectively, the Consulting Agreement, dated
as of March 30, 1998, among Holding, North American Van Lines and CDR (and, in
each case, its respective permitted successors and assigns thereunder) and the
Indemnification Agreement, dated as of March 30, 1998, among Holding, North
American Van Lines, CDR and the Investors (and, in each case, its respective
permitted successors and assigns thereunder), as each may be amended,
supplemented, waived or otherwise modified from time to time in accordance with
the terms thereof and of the indenture.
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"Management Guarantees" means guarantees
(x) of up to an aggregate principal amount of $10.0 million of
borrowings by Management Investors in connection with their purchase of
Management Stock outstanding at any time (less the aggregate principal
amount of then outstanding loans made to Management Investors by North
American Van Lines pursuant to clause (3) of the definition of Management
Advances) or
(y) made on behalf of, or in respect of loans or advances made to,
directors, officers or employees of Holding, North American Van Lines or any
Restricted Subsidiary (1) in respect of travel, entertainment and
moving-related expenses incurred in the ordinary course of business, or
(2) in the ordinary course of business and (in the case of this clause (2))
not exceeding $2.5 million in the aggregate outstanding at any time.
"Management Investors" means the officers, directors, employees and other
members of the management of Holding, North American Van Lines or any of their
respective Subsidiaries (or of any Agent), or family members or relatives
thereof, or trusts or partnerships for the benefit of any of the foregoing, or
any of their heirs, executors, successors and legal representatives, or any
Agent, who at any date beneficially own or have the right to acquire, directly
or indirectly, Capital Stock of North American Van Lines or Holding.
"Management Stock" means Capital Stock of North American Van Lines or
Holding (including any options, warrants or other rights in respect thereof)
held by any of the Management Investors.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other non-cash form) therefrom, in each case net of
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition (including as a consequence of any
transfer of funds in connection with the application thereof in accordance
with the covenant described under "--Certain Covenants--Limitation on Sales
of Assets and Subsidiary Stock"),
(2) all payments made, and all installment payments required to be made,
on any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets, or
that must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law, be repaid out of the proceeds from
such Asset Disposition,
(3) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, or to any other Person (other than North American Van Lines or
a Restricted Subsidiary) owning a beneficial interest in the assets disposed
of in such Asset Disposition and
(4) any liabilities or obligations associated with the assets disposed
of in such Asset Disposition and retained by North American Van Lines or any
Restricted Subsidiary after such Asset Disposition, including without
limitation pension and other post-employment benefit liabilities,
liabilities related to environmental matters, and liabilities relating to
any indemnification obligations associated with such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of any securities
of North American Van Lines or any Subsidiary by North American Van Lines or any
Subsidiary, or any capital contribution, means
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the cash proceeds of such issuance, sale or contribution net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance, sale or contribution and net of taxes paid or
payable as a result thereof.
"Note Guarantee" means any of (1) the guarantees of the notes by the
Domestic Subsidiaries to be entered into on the Issue Date as described under
"--Note Guarantees," and (2) any guarantee that may from time to time be entered
into by a Restricted Subsidiary of North American Van Lines pursuant to the
covenant described under "--Certain Covenants--Future Note Guarantors."
"Note Guarantor" means any Restricted Subsidiary of North American Van Lines
that enters into a Note Guarantee.
"Officer" means, with respect to North American Van Lines or any other
obligor upon the notes, the Chairman of the Board, the President, the Chief
Executive Officer, the Chief Financial Officer, any Vice President, the
Controller, the Treasurer or the Secretary (a) of such Person or (b) if such
Person is owned or managed by a single entity, of such entity (or any other
individual designated as an "Officer" for the purposes of the indenture by the
Board of Directors).
"Officer's Certificate" means, with respect to North American Van Lines or
any other obligor upon the notes, a certificate signed by one Officer of such
Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the trustee. The counsel may be an employee of or
counsel to North American Van Lines or the trustee.
"Permitted Holder" means any of the following: (1) any of the Investors,
Management Investors, CDR and their respective Affiliates; (2) any investment
fund or vehicle managed, sponsored or advised by CDR; and (3) any Person acting
in the capacity of an underwriter in connection with a public or private
offering of Capital Stock of Holding or North American Van Lines.
"Permitted Investment" means an Investment by North American Van Lines or
any Restricted Subsidiary in, or consisting of, any of the following:
(1) a Restricted Subsidiary, North American Van Lines, or a Person that
will, upon the making of such Investment, become a Restricted
Subsidiary;
(2) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, or is liquidated into, North American
Van Lines or a Restricted Subsidiary;
(3) Temporary Cash Investments or Cash Equivalents;
(4) receivables owing to North American Van Lines or any Restricted
Subsidiary, if created or acquired in the ordinary course of business;
(5) any securities or other Investments received as consideration in, or
retained in connection with, sales or other dispositions of property or
assets, including Asset Dispositions made in compliance with the
covenant described under "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock";
(6) securities or other Investments received in settlement of debts created
in the ordinary course of business and owing to North American Van Lines
or any Restricted Subsidiary, or as a result of foreclosure, perfection
or enforcement of any Lien, or in satisfaction of judgments, including
in connection with any bankruptcy proceeding or other reorganization of
another Person;
(7) Investments in existence or made pursuant to legally binding written
commitments in existence on the Issue Date;
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(8) Currency Agreements, Interest Rate Agreements and related Hedging
Obligations, which obligations are Incurred in compliance with the
covenant described under "--Certain Covenants--Limitation on
Indebtedness";
(9) pledges or deposits (x) with respect to leases or utilities provided to
third parties in the ordinary course of business or (y) otherwise
described in the definition of "Permitted Liens" or made in connection
with Liens permitted under the covenant described under "--Certain
Covenants--Limitation on Liens";
(10) Investments in joint ventures or similar entities that are not
Restricted Subsidiaries, or in any Related Business, in an aggregate
amount outstanding at any time not to exceed the greater of
(x) $15.0 million and (y) 2.5% of Consolidated Tangible Assets;
(11) (1) Investments in any Receivables Subsidiary, or in connection with a
Financing Disposition by or to any Receivables Entity, including
Investments of funds held in accounts permitted or required by the
arrangements governing such Financing Disposition or any related
Indebtedness, or (2) any promissory note issued by North American Van
Lines or Holding, provided that if Holding receives cash from the
relevant Receivables Entity in exchange for such note, an equal cash
amount is contributed by Holding to North American Van Lines;
(12) bonds secured by assets leased to and operated by North American Van
Lines or any Restricted Subsidiary that were issued in connection with
the financing of such assets so long as North American Van Lines or any
Restricted Subsidiary may obtain title to such assets at any time by
paying a nominal fee, canceling such bonds and terminating the
transaction;
(13) notes;
(14) any Investment to the extent made using Capital Stock of North American
Van Lines (other than Disqualified Stock), or Capital Stock of Holding,
as consideration;
(15) Management Advances and payments in respect thereof;
(16) Agent Guarantees in an aggregate principal amount not exceeding
$10.0 million outstanding at any time and payments in respect thereof;
and
(17) other Investments in an aggregate amount outstanding at any time not to
exceed $10.0 million.
"Permitted Junior Securities" means:
(a) debt securities of North American Van Lines as reorganized or
readjusted, if applicable, and guaranteed by the Note Guarantors, or
debt securities of North American Van Lines (or any other company, trust
or organization provided for by a plan of reorganization or readjustment
succeeding to the assets and liabilities of North American Van Lines)
and guaranteed by the Note Guarantors, in each of the foregoing cases,
which securities and guarantees are subordinated, to at least the same
extent as the notes and the Note Guarantees, to the payment of all
Senior Indebtedness and guarantees thereof that will be outstanding
after giving effect to such reorganization or readjustment, if
applicable, so long as
(1) such debt securities are not entitled to the benefit of covenants
or defaults more beneficial to the holders of such debt securities than
those in effect with respect to the notes (or the Senior Indebtedness,
after giving effect to such reorganization or readjustment, if
applicable) and
(2) such debt securities shall not provide for amortization-including
sinking fund and mandatory prepayment provisions (other than a mandatory
prepayment of the type described under the caption "--Change of Control")
commencing prior to the date which is one year after
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the final scheduled maturity date of the Senior Indebtedness (as modified
by such reorganization or readjustment, if applicable),
or
(b) Capital Stock in North American Van Lines or any Note Guarantor;
provided, that in each case with respect to clauses (a) and (b) above, if a
new corporation results from any such reorganization or readjustment, such
corporation assumes all Senior Indebtedness that will be outstanding after
giving effect thereto and provided further, that the rights of the holders of
Senior Indebtedness are not impaired.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or the nonpayment of which in the aggregate would not
reasonably be expected to have a material adverse effect on North
American Van Lines and its Restricted Subsidiaries, or that are being
contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of North
American Van Lines or a Subsidiary thereof, as the case may be, in
accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business in respect of obligations that are not overdue for a period of
more than 60 days, or that are bonded or that are being contested in good
faith and by appropriate proceedings;
(c) pledges, deposits or Liens in connection with workers' compensation,
unemployment insurance and other social security and other similar
legislation or other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers
under insurance or self-insurance arrangements);
(d) pledges, deposits or Liens to secure the performance of bids, tenders,
trade, government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory obligations,
completion guarantees, surety, judgment, appeal or performance bonds,
other similar bonds, instruments or obligations, and other obligations of
a like nature incurred in the ordinary course of business;
(e) easements (including reciprocal easement agreements), rights-of-way,
building, zoning and similar restrictions, utility agreements, covenants,
reservations, restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially interfere with the ordinary conduct of the business of North
American Van Lines and its Subsidiaries, taken as a whole;
(f) Liens existing on, or provided for under written arrangements existing
on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of North American Van Lines or any of its Subsidiaries
existing or arising under written arrangements existing on the Issue
Date) securing any Refinancing Indebtedness in respect of such
Indebtedness so long as the Lien securing such Refinancing Indebtedness
is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or under such written arrangements could
secure) the original Indebtedness;
(g) (1) mortgages, liens, security interests, restrictions, encumbrances or
any other matters of record that have been placed by any developer,
landlord or other third party on property over which North American Van
Lines or any Restricted Subsidiary of North American Van Lines has
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easement rights or on any leased property and subordination or similar
agreements relating thereto and (2) any condemnation or eminent domain
proceedings affecting any real property;
(h) Liens securing Hedging Obligations, Purchase Money Obligations or
Capitalized Lease Obligations Incurred in compliance with the covenant
described under "--Certain Covenants--Limitation on Indebtedness";
(i) Liens arising out of judgments, decrees, orders or awards in respect of
which North American Van Lines shall in good faith be prosecuting an
appeal or proceedings for review, which appeal or proceedings shall not
have been finally terminated, or if the period within which such appeal
or proceedings may be initiated shall not have expired;
(j) leases, subleases, licenses or sublicenses to third parties;
(k) Liens securing
(1) Indebtedness Incurred in compliance with clause (b)(1), (b)(4),
(b)(5), (b)(7) or (b)(8)(F) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness,"
(2) Bank Indebtedness,
(3) commercial bank Indebtedness,
(4) the notes or
(5) Indebtedness or other obligations of any Receivables Entity;
(l) Liens existing on property or assets of a Person at the time such Person
becomes a Subsidiary of North American Van Lines (or at the time North
American Van Lines or a Restricted Subsidiary acquires such property or
assets); provided, however, that such Liens are not created in connection
with, or in contemplation of, such other Person becoming such a
Subsidiary (or such acquisition of such property or assets), and that
such Liens are limited to all or part of same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under
which such Liens arose, could secure) the obligations to which such Liens
relate;
(m) Liens on Capital Stock or other securities of an Unrestricted Subsidiary
that secure Indebtedness or other obligations of such Unrestricted
Subsidiary;
(n) any encumbrance or restriction (including, but not limited to, put and
call agreements) with respect to Capital Stock of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement;
and
(o) Liens securing Refinancing Indebtedness Incurred in respect of any
Indebtedness secured by, or securing any refinancing, refunding,
extension, renewal or replacement (in whole or in part) of any other
obligation secured by, any other Permitted Liens, provided that any such
new Lien is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under
which the original Lien arose, could secure) the obligations to which
such Liens relate.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that by its terms is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
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"Purchase Money Obligations" means any Indebtedness Incurred to finance or
refinance the acquisition, leasing, construction or improvement of property
(real or personal) or assets, and whether acquired through the direct
acquisition of such property or assets or the acquisition of the Capital Stock
of any Person owning such property or assets, or otherwise.
"Qualified Proceeds" means property or assets that are used, usable or
useful in, or a majority of the Voting Stock of any Person engaged in, a Related
Business; provided that the fair market value of any such assets or Capital
Stock shall be determined by the Board of Directors in good faith.
"Receivable" means a right to receive payment arising from a sale or lease
of goods or services by a Person pursuant to an arrangement with another Person
pursuant to which such other Person is obligated to pay for goods or services
under terms that permit the purchase of such goods and services on credit, as
determined in accordance with GAAP.
"Receivables Entity" means
(x) any Receivables Subsidiary or
(y) any other Person that is engaged in the business of acquiring,
selling, collecting, financing or refinancing Receivables, accounts (as
defined in the Uniform Commercial Code as in effect in any jurisdiction from
time to time), other accounts and/or other receivables, and/or related
assets.
"Receivables Fees" means distributions or payments made directly or by means
of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Financing.
"Receivables Financing" means any financing of Receivables of North American
Van Lines or any Restricted Subsidiary that have been transferred to a
Receivables Entity in a Financing Disposition.
"Receivables Subsidiary" means a Subsidiary of North American Van Lines that
(a) is engaged solely in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time) and
other accounts and receivables (including any thereof constituting or
evidenced by chattel paper, instruments or general intangibles), all
proceeds thereof and all rights (contractual and other), collateral and
other assets relating thereto, and any business or activities incidental or
related to such business, and
(b) is designated as a "Receivables Subsidiary" by the Board of
Directors.
"Receivables Repurchase Obligation" means any obligation of a seller of
receivables to repurchase receivables (including Receivables, accounts (as
defined in the Uniform Commercial Code as in effect in any jurisdiction from
time to time) and other accounts and receivables (including any thereof
constituting or evidenced by chattel paper, instruments or general intangibles))
arising as a result of a breach of a representation, warranty or covenant or
otherwise, including as a result of a receivable or portion thereof becoming
subject to any asserted defense, dispute, off-set or counterclaim of any kind as
a result of any action taken by, any failure to take action by or any other
event relating to the seller.
"Refinance" means refinance, refund, replace, renew, repay, modify, restate,
defer, substitute, supplement, reissue, resell or extend (including pursuant to
any defeasance or discharge mechanism); and the terms "refinances," "refinanced"
and "refinancing" as used for any purpose in the indenture shall have a
correlative meaning.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refinance
any Indebtedness existing on the date of the indenture or Incurred in compliance
with the indenture (including Indebtedness of North American Van Lines that
refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in
the indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of
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another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, that
(1) if the Indebtedness being refinanced is Subordinated Obligations or
Guarantor Subordinated Obligations, the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average Life of the Indebtedness being
refinanced,
(2) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to or less than the sum of (x) the aggregate principal amount
(or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being refinanced, plus (y) fees,
underwriting discounts, premiums and other costs and expenses incurred in
connection with such Refinancing Indebtedness and
(3) Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that is not a Note Guarantor that refinances
Indebtedness of North American Van Lines or a Note Guarantor that was
incurred by North American Van Lines or a Note Guarantor pursuant to
paragraph (a) of the covenant described under "--Certain
Covenants-Limitation on Indebtedness" or (y) Indebtedness of North American
Van Lines or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means those businesses in which North American Van Lines
or any of its Subsidiaries is engaged on the date of the indenture, or that are
related, complementary, incidental or ancillary thereto or extensions,
developments or expansions thereof.
"Related Taxes" means
(x) any taxes, charges or assessments, including but not limited to
sales, use, transfer, rental, ad valorem, value-added, stamp, property,
consumption, franchise, license, capital, net worth, gross receipts, excise,
occupancy, intangibles or similar taxes, charges or assessments (other than
federal, state or local taxes measured by income and federal, state or local
withholding imposed on payments made by Holding), required to be paid by
Holding by virtue of its being incorporated or having Capital Stock
outstanding (but not by virtue of owning stock or other equity interests of
any corporation or other entity other than North American Van Lines or any
of its Subsidiaries), or being a holding company parent of North American
Van Lines or receiving dividends from or other distributions in respect of
the Capital Stock of North American Van Lines, or having guaranteed any
obligations of North American Van Lines or any Subsidiary thereof, or having
made any payment in respect of any of the items for which North American Van
Lines is permitted to make payments to Holding pursuant to the covenant
described under "--Certain Covenants--Limitation on Restricted Payments," or
(y) any other federal, state, foreign, provincial or local taxes
measured by income for which Holding is liable up to an amount not to exceed
with respect to such federal taxes the amount of any such taxes that North
American Van Lines would have been required to pay on a separate company
basis or on a consolidated basis if North American Van Lines had filed a
consolidated return on behalf of an affiliated group (as defined in
Section 1504 of the Code or an analogous provision of state, local or
foreign law) of which it were the common parent, or with respect to state
and local taxes, on a combined basis if North American Van Lines had filed a
combined return on behalf of an affiliated group consisting only of North
American Van Lines and its Subsidiaries, or
(z) any federal, state, foreign, provincial or local withholding taxes
paid by Holding by virtue of any dividend distributions in respect of the
Preferred Stock issued in the Allied Acquisition (other than any such
dividend distributions paid in cash).
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"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Payment Transaction" means any Restricted Payment permitted
pursuant to the covenant described under "--Certain Covenants--Limitation on
Restricted Payments," any Permitted Payment, any Permitted Investment, or any
transaction specifically excluded from the definition of the term "Restricted
Payment."
"Restricted Subsidiary" means any Subsidiary of North American Van Lines
other than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of North American Van Lines
secured by a Lien.
"Senior Credit Agreement" means the credit agreement dated as of the Issue
Date among North American Van Lines, any Subsidiaries of North American Van
Lines party thereto from time to time, the banks and other financial
institutions party thereto from time to time, Banc of America Securities LLC, as
syndication agent, and The Chase Manhattan Bank as collateral agent and
administrative agent, as such agreement may be assumed by any successor in
interest, and as such agreement may be amended, supplemented, waived or
otherwise modified from time to time, or refunded, refinanced, restructured,
replaced, renewed, repaid, increased or extended from time to time (whether in
whole or in part, whether with the original agent and lenders or other agents
and lenders or otherwise, and whether provided under the original Senior Credit
Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior Credit
Agreement, any Loan Documents (as defined therein), any notes and letters of
credit issued pursuant thereto and any guarantee and collateral agreement,
patent and trademark security agreement, mortgages, letter of credit
applications and other guarantees, pledge agreements, security agreements and
collateral documents, and other instruments and documents, executed and
delivered pursuant to or in connection with any of the foregoing, in each case
as the same may be amended, supplemented, waived or otherwise modified from time
to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or otherwise,
and whether provided under the original Senior Credit Agreement or one or more
other credit agreements, indentures (including the indenture) or financing
agreements or otherwise). Without limiting the generality of the foregoing, the
term "Senior Credit Facility" shall include any agreement
(1) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
(2) adding Subsidiaries of North American Van Lines as additional
borrowers or guarantors thereunder,
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder or
(4) otherwise altering the terms and conditions thereof.
"Senior Subordinated Indebtedness" means the notes and any other
Indebtedness of North American Van Lines that ranks PARI PASSU with the notes.
"Significant Domestic Subsidiary" means any Domestic Subsidiary that is a
Significant Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" of North American Van Lines within the meaning of
Rule 1-02 under Regulation S-X promulgated by the SEC, as in effect on the Issue
Date.
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"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc., and its successors.
"Standard Receivable Obligations" means representations, warranties,
covenants, indemnities and other obligations (including Guarantees and
Indebtedness) that are reasonably customary in connection with a Financing
Disposition (as determined by North American Van Lines in good faith),
including, without limitation, those relating to the servicing of the assets of
a Receivables Entity, it being understood that any Receivables Repurchase
Obligation shall be deemed to be a Standard Receivable Obligation.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency).
"Subordinated Obligations" means any Indebtedness of North American Van
Lines (whether outstanding on the date of the indenture or thereafter Incurred)
that is expressly subordinated in right of payment to the notes pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other equity interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (1) such Person or (2) one or
more Subsidiaries of such Person.
"Successor Company" shall have the meaning assigned thereto in clause (1)
under "--Merger and Consolidation."
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of the
Issue Date, between North American Van Lines and Holding, as the same may be
amended, supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof and of the indenture.
"Temporary Cash Investments" means any of the following:
(1) any investment in (X) direct obligations of the United States of
America or any agency or instrumentality thereof or obligations Guaranteed
by the United States of America or any agency or instrumentality thereof, or
(Y) direct obligations of any foreign country recognized by the United
States of America rated at least "A" by S&P or "A-1" by Moody's (or, in
either case, the equivalent of such rating by such organization or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any
nationally recognized rating organization),
(2) overnight bank deposits, and investments in time deposit accounts,
certificates of deposit, bankers' acceptances and money market deposits (or,
with respect to foreign banks, similar instruments) maturing not more than
one year after the date of acquisition thereof issued by (X) any lender
under the Senior Credit Agreement or (Y) a bank or trust company that is
organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having
capital and surplus aggregating in excess of $250 million (or the foreign
currency equivalent thereof) and whose long term debt is rated at least "A"
by S&P or "A-1" by Moody's (or, in either case, the equivalent of such
rating by such organization or, if no rating of S&P or Moody's then exists,
the equivalent of such rating by any nationally recognized rating
organization) at the time such Investment is made,
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) or (2) above
entered into with a bank meeting the qualifications described in clause (2)
above,
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(4) investments in commercial paper, maturing not more than 270 days
after the date of acquisition, issued by a Person (other than North American
Van Lines or any of its Subsidiaries), with a rating at the time as of which
any Investment therein is made of "P-2" (or higher) according to Moody's or
"A-2" (or higher) according to S&P (or, in either case, the equivalent of
such rating by such organization or, if no rating of S&P or Moody's then
exists, the equivalent of such rating by any nationally recognized rating
organization),
(5) Investments in securities maturing not more than one year after the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision
or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's
(or, in either case, the equivalent of such rating by such organization or,
if no rating of S&P or Moody's then exists, the equivalent of such rating by
any nationally recognized rating organization),
(6) investment funds investing 95% of their assets in securities of the
type described in clauses (1)--(5) above (which funds may also hold
reasonable amounts of cash pending investment and/or distribution),
(7) any money market deposit accounts issued or offered by a domestic
commercial bank or a commercial bank organized and located in a country
recognized by the United States of America, in each case, having capital and
surplus in excess of $250 million (or the foreign currency equivalent
thereof), or investments in money market funds complying with the risk
limiting conditions of Rule 2a-7 (or any successor rule) of the SEC under
the Investment Company Act of 1940, as amended, or
(8) similar short-term investments approved by the Board of Directors in
the ordinary course of business.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection77aaa-7bbbb) as in effect on the date of the indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Transactions" means, collectively, the Allied Acquisition, the offering and
issuance of the notes and the Holding Notes, the initial borrowings under the
Senior Credit Facility, the issuance by Holding of Capital Stock as part of the
consideration for the Allied Acquisition, the Holding Stock Issuance, and all
other related transactions.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the trustee assigned by the trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means
(1) any Subsidiary of North American Van Lines that at the time of
determination is an Unrestricted Subsidiary, as designated by the Board of
Directors in the manner provided below, and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of North American Van Lines
(including any newly acquired or newly formed Subsidiary of North American Van
Lines) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, North American Van Lines or any other Restricted
Subsidiary of North American Van Lines that is not a Subsidiary of the
Subsidiary to be so designated; provided, that either
(A) the Subsidiary to be so designated has total consolidated assets of
$1,000 or less or
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(B) if such Subsidiary has consolidated assets greater than $1,000, then
such designation would be permitted under the covenant described under
"--Certain Covenants--Limitation on Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, that immediately after giving effect to such
designation either
(x) North American Van Lines could incur at least $1.00 of additional
Indebtedness under paragraph (a) in the covenant described under "--Certain
Covenants--Limitation on Indebtedness" or
(y) the Consolidated Coverage Ratio would be greater than it was immediately
prior to giving effect to such designation.
Any such designation by the Board of Directors shall be evidenced to the trustee
by promptly filing with the trustee a copy of the resolution of North American
Van Lines' Board of Directors giving effect to such designation and an Officer's
Certificate of North American Van Lines certifying that such designation
complied with the foregoing provisions.
"Voting Stock" of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of the principal United States federal income tax
consequences of the acquisition, ownership and disposition of the new notes to
the beneficial owners, and the principal U.S. estate tax consequences of the
ownership of the notes to beneficial owners who are non-U.S. holders (as defined
below).
This summary is based on provisions of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed U.S. Treasury regulations
promulgated thereunder (the "Treasury Regulations") and administrative and
judicial interpretations thereof, all as of the date hereof and all of which are
subject to change, possibly on a retroactive basis.
This summary addresses tax consequences only for holders that exchange old
notes for new notes and who hold the notes as capital assets. This summary is
for general information only, and does not address all of the tax consequences
that may be relevant to particular holders in light of their personal
circumstances, or to certain types of holders (such as banks and other financial
institutions, real estate investment trusts, regulated investment companies,
insurance companies, tax-exempt organizations, dealers in securities and persons
who hold the notes as part of a hedge or a straddle with other investments). In
addition, this summary does not include any description of the tax laws of any
state, local or non-U.S. government that may be applicable to a particular
holder.
HOLDERS OF NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO THEM OF THE
EXCHANGE, OWNERSHIP AND DISPOSITION OF THE NOTES, AS WELL AS THE TAX
CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER U.S. FEDERAL TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
EXCHANGE OFFER
The exchange of any old note for a new note should not constitute a taxable
exchange of the old note. As a result, the new notes should have the same issue
price (and adjusted issue price immediately after the exchange) and the same
amount of original issue discount, if any, as the old notes, and each holder
should have the same adjusted tax basis and holding period in the new notes as
it had in the old notes immediately before the exchange. The following
discussion assumes that the exchange of old notes for new notes pursuant to the
exchange offer will not be treated as a taxable exchange and that the old notes
and the new notes will be treated as the same security for federal income tax
purposes.
TAXATION OF U.S. HOLDERS
As used in this prospectus, the term "U.S. holder" means a holder of a note
that is, for U.S. federal income tax purposes,
(a) a citizen or resident of the United States,
(b) a corporation or partnership created or organized in the United States or
under the laws of the United States or of any state of the United States,
(c) an estate whose income is includable in gross income for U.S. federal income
tax purposes regardless of its source or
(d) a trust if
(1) a court within the United States is able to exercise primary supervision
over the administration of the trust and
(2) at least one U.S. person has authority to control all substantial
decisions of the trust.
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The Code authorizes the issuance of Treasury Regulations that, under certain
circumstances, could reclassify as a non-U.S. partnership a partnership that
would otherwise be treated as a U.S. partnership, or could reclassify as a
U.S. partnership a partnership that would otherwise be treated as a non-U.S.
partnership. Such regulations would apply only to partnerships created or
organized after the date that proposed Treasury Regulations are filed with the
Federal Register (or, if earlier, the date of issuance of a notice substantially
describing the expected contents of the regulations).
PAYMENT OF INTEREST ON THE NOTES OTHER THAN PAYMENTS UPON REGISTRATION
DEFAULT. In general, interest paid on a note (other than payments upon a
registration default discussed below) will be taxable to a U.S. holder as
ordinary interest income, as received or accrued, in accordance with such
holder's method of accounting for federal income tax purposes. If original issue
discount on a note is not greater than a DE MINIMIS amount equal to 0.25% of its
stated principal amount multiplied by the number of complete years to its
maturity, any such discount will be deemed to be equal to zero, and a holder
will not be required to accrue a portion of such discount as income in each
taxable year. See, however, the discussion below under "--Payments upon
Registration Default." Holders should consult their tax advisors as to the
possible effect of payments upon a registration default on the treatment of
original issue discount on the note if any.
PAYMENTS UPON REGISTRATION DEFAULT. Because the notes provide for the
payment of additional interest under the circumstances described above under
"Description of Notes--Registration Rights," the notes could be subject to
certain Treasury Regulations relating to debt instruments that provide for one
or more contingent payments (the "Contingent Payment Regulations"). Under the
Contingent Payment Regulations, however a payment is not a contingent payment
merely because of a contingency that, as of the issue date, is either "remote"
or "incidental." The Company intends to take the position that, for purposes of
the Contingent Payment Regulations, the payment of such additional interest is a
remote or incidental contingency as of the issue date.
The Company also intends to take the position that payments of additional
interest that were actually made were "insignificant" under the Contingent
Payment Regulations and that the notes are not treated as reissued for purposes
of the original issue discount rules as a result of such payments. If the U.S.
Internal Revenue Service (the "IRS") were to take the position that the payments
of additional interest were actually made and such payments were "not
insignificant" under the Contingent Payment Regulations, the notes would be
treated as reissued for purposes of applying the original issue discount rules.
As a consequence of such reissuance, a U.S. holder could be required to accrue
all payments on a note in excess of its issue price (including, possibly,
amounts that would otherwise constitute DE MINIMIS original issue discount) on a
constant yield basis.
If the IRS were to take the position that, as of the date of issuance, the
payment of such additional interest were not a "remote" or "incidental"
contingency for purposes of the Contingent Payment Regulations, then (1) all
payments (including any projected payments of such additional interest) on a
note in excess of its issue price would effectively be treated as original issue
discount, and (2) in each taxable year, a holder would be required to include an
allocable portion of such amounts in gross income on a constant yield basis
whether or not the payment of such additional interest were fixed or
determinable in the taxable year.
The Company's position for purposes of the Contingent Payment Regulations
that the payment of such additional interest is a remote contingency as of the
issue date is binding on each holder for federal income tax purposes, unless
such holder discloses in the proper manner to the IRS that it is taking a
different position.
Holders should consult their tax advisors as to the tax considerations
relating to debt instruments providing for payments such as the additional
interest payable upon a registration default, particularly in connection with
the possible application of the Contingent Payment Regulations.
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SALE, EXCHANGE OR RETIREMENT OF THE NOTES. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a note, a
U.S. holder will generally recognize taxable gain or loss equal to the
difference between the sum of the cash and the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued interest, which will be taxable as ordinary
income) and such holder's adjusted tax basis in the note.
Gain or loss recognized on the disposition of a note generally will be
capital gain or loss, and will be long-term capital gain or loss if, at the time
of such disposition, the holder's holding period for the note is more than one
year. A reduced tax rate on capital gain will apply to an individual
U.S. holder if such holder's holding period for the note is more than one year
at the time of disposition.
MARKET DISCOUNT. A U.S. holder (other than a holder who makes the election
described below) that acquires a note with market discount that is not de
minimis, except in certain non-recognition transactions, generally will be
required to treat any gain realized upon the disposition of the note as interest
income to the extent of the market discount that accrued during the period such
holder held such note. (For this purpose, a person disposing of a market
discount note in a transaction other than a sale, exchange or involuntary
conversion generally is treated as realizing an amount equal to the fair market
value of the note.) A holder may also be required to recognize as ordinary
income any principal payments with respect to a note to the extent such payments
do not exceed the accrued market discount on the note. For these purposes,
market discount generally equals the excess of the stated redemption price of
the note over the tax basis of the note in the hands of the holder immediately
after its acquisition. However, market discount is deemed not to exist if the
market discount is less than a de minimis amount equal to 0.25% of the note's
redemption price at maturity multiplied by the number of complete years to the
note's maturity after the holder acquired the note (or, in the case of a holder
that acquires a new note pursuant to the exchange offer, the old note exchanged
for such new note).
The market discount rules also provide that any holder of notes that were
acquired at a market discount may be required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to acquire or
carry the notes, until the notes are disposed of.
A holder of a note acquired at a market discount may elect to include market
discount in income as the discount accrues. In such a case, the foregoing rules
with respect to the recognition of ordinary income on dispositions and with
respect to the deferral of interest deductions on indebtedness related to such
note would not apply. The current inclusion election applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS.
AMORTIZABLE BOND PREMIUM. Generally, if the tax basis of an obligation held
as a capital asset exceeds the amount payable at maturity of the obligation,
such excess may constitute amortizable bond premium that the holder of such
obligation may elect to amortize under the constant interest rate method and
deduct over the period from the holder's acquisition date to the obligation's
maturity date. A holder that elects to amortize bond premium must reduce its tax
basis in the related obligation by the amount of the aggregate deductions
allowable for the amortizable bond premium. Any election to amortize bond
premium applies to all bonds (other than bonds the interest on which is
excludible from gross income) held by the holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the holder.
The election may not be revoked without the consent of the IRS.
In the case of an obligation, such as a note, that may be called at a
premium prior to maturity, an earlier call date is treated as its maturity date,
and the amount of bond premium is determined by treating the amount payable on
such call date as the amount payable at maturity if such a calculation produces
a smaller amortizable bond premium than any other call date or the method
described in the preceding paragraph. For purposes of amortizing bond premium,
if a holder of a note is required to amortize and deduct bond premium by
reference to a call date, the note will be treated as maturing on such date for
the amount payable, and, if not redeemed on such date, the note will be treated
as reissued on such date for
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the amount so payable. If a note purchased at a premium is redeemed pursuant to
a call prior to such early call date or its maturity, a purchaser who has
elected to deduct bond premium may deduct the excess of its adjusted tax basis
in the note over the amount received on redemption (or, if greater, the amount
payable on maturity) as an ordinary loss in the taxable year of redemption.
The amortizable bond premium deduction is treated as a reduction of interest
on the bond instead of as a deduction. The offset of amortizable bond premium
against interest income on the bond occurs when income is taxable to a holder as
received or accrued, in accordance with such holder's method of accounting for
such income.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The Company will report to
each U.S. holder and the IRS amounts paid on or with respect to the notes during
each calendar year and the amount of tax, if any, withheld from such payments.
Certain non-corporate U.S. holders of the notes (including all individuals)
may be subject to backup withholding. In general, backup withholding will apply
to a non-corporate U.S. holder if the U.S. holder:
- fails to furnish its Taxpayer Identification Number, or TIN (which for an
individual is the holder's Social Security number);
- furnishes an incorrect TIN;
- is notified by the IRS that it has failed to properly report payments of
interest and dividends; or
- under certain circumstances, fails to certify, under penalties of perjury,
that it has furnished a correct TIN and has not been notified by the IRS
that it is subject to backup withholding due to underreporting of interest
or dividends, or otherwise fails to comply with applicable requirements of
the backup withholding rules.
Backup withholding will not apply if the non-corporate U.S. holder provides
a properly completed IRS Form W-9 to the Company or the Company's paying agent.
The amount of any backup withholding from a payment to a U.S. holder will be
allowed as a credit against such U.S. holder's U.S. federal income tax liability
and may entitle such U.S. holder to a refund.
TAXATION OF NON-U.S. HOLDERS
The following is a general discussion of the U.S. federal income and estate
tax considerations relating to the ownership and disposition of the notes by a
holder that is not a U.S. holder (a "non-U.S. holder"). For purposes of the
following discussion, interest and gain on the sale, exchange or other
disposition of the notes will be considered "U.S. trade or business income" if
such income or gain (a) is effectively connected with the conduct of a trade or
business in the United States, and (b) in the case of a resident of a country
having the benefit of an income tax treaty or agreement between that country and
the United States, is attributable to a permanent establishment in the United
States, in each case of a particular non-U.S. holder.
PAYMENT OF INTEREST ON NOTES. A non-U.S. holder will not be subject to U.S.
federal income or withholding tax in respect of interest income on the notes if
the interest qualifies for the so-called "portfolio interest exemption." This
will be the case if each of the following requirements is satisfied:
- The interest is not U.S. trade or business income.
- The non-U.S. holder provides to the Company or the Company's paying agent
the appropriate certification.
- The non-U.S. holder does not actually or constructively own 10% or more of
the Company's voting stock.
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- The non-U.S. holder is not a controlled foreign corporation, within the
meaning of the Code, that is actually or constructively related to the
Company.
The certification requirement can be satisfied in one of the following ways:
- If the non-U.S. holder provides to the Company or the Company's paying
agent a statement on IRS Form W-8BEN (or suitable substitute or successor
form), together with all appropriate attachments, signed under penalties
of perjury, identifying the non-U.S. holder and stating, among other
things, that the non-U.S. holder is not a U.S. person.
- If a note is held through a securities clearing organization, bank or
other financial institution that holds customers' securities in the
ordinary course of its trade or business, (a) the non-U.S. holder provides
such a form to the organization, bank or other institution and (b) the
organization, bank or other institution, under penalties of perjury,
certifies to the Company that it has received such statement from the
beneficial owner or another intermediary and furnishes the Company or the
Company's paying agent with a copy.
Alternative documentation procedures may also be available for satisfying
the certification requirement described above. For instance, under one such
alternative, a withholding agent would be allowed to rely on an IRS Form W-8IMY
(or suitable substitute or successor form), furnished by a financial institution
or other intermediary on behalf of one or more beneficial owners or other
intermediaries, without having to obtain from the beneficial owner the
certificate described in the preceding paragraph, provided that the financial
institution or intermediary has entered into a withholding agreement with the
IRS and thus is a qualified intermediary. Under another alternative, an
authorized non-U.S. agent of a U.S. withholding agent would be permitted to act
on behalf of the U.S. withholding agent, provided specified conditions are met.
With respect to the certification requirement for notes that are held by a
non-U.S. partnership, the final regulations provide that unless the partnership
has entered into a withholding agreement with the IRS, the partnership will be
required, in addition to providing an intermediary Form W-8IMY, to attach an
appropriate certification by each partner. Prospective holders, including
non-U.S. partnerships and their partners, should consult their tax advisors
regarding possible additional reporting requirements.
If the portfolio interest exemption is not satisfied with respect to a
non-U.S. holder, a 30% withholding tax will apply to interest income on the
notes paid to such non-U.S. holder, unless one of the following two exceptions
is satisfied: The first exception is that an applicable income tax treaty or
agreement reduces or eliminates such tax, and a non-U.S. holder claiming the
benefit of such treaty or agreement provides to the Company or the Company's
paying agent a properly executed IRS Form W-8BEN (or suitable substitute or
successor form). The second exception is that the interest is U.S. trade or
business income and the non-U.S. holder provides an appropriate statement to
that effect on an IRS Form W-8ECI (or suitable substitute or successor form). In
the latter case, such non-U.S. holder generally will be subject to U.S. federal
income tax with respect to all income from the notes in the same manner as U.S.
holders, as described above. Additionally, in such event, non-U.S. holders that
are corporations could be subject to a branch profits tax on such income at a
rate of 30% (or at a reduced rate under an applicable income tax treaty or
agreement).
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. A non-U.S. holder generally will
not be subject to U.S. federal income tax (or withholding of U.S. federal
withholding tax) in respect of gain realized upon the sale, exchange (other than
an exchange pursuant to the exchange offer), redemption, retirement at maturity
or other disposition of notes, unless (a) the gain is U.S. trade or business
income or (b) the holder is an individual who is present in the United States
for a period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met.
As described under "--Taxation of U.S. Holders--Payments upon Registration
Default," the notes provide for the payment of additional interest upon a
registration default. Non-U.S. holders should consult
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their tax advisors as to the tax considerations relating to debt instruments
providing for payments such as the additional interest, in particular as to the
availability of the exemption for portfolio interest, and the ability of holders
to claim the benefits of income tax treaty exemptions from U.S. withholding tax
on interest, in respect of such additional interest.
ESTATE TAX. Subject to applicable estate tax treaty regulations, notes held
at the time of death (or theretofore transferred subject to certain retained
rights or powers) by an individual who at the time of death is a non-U.S. holder
will not be included in such holder's gross estate for U.S. federal estate tax
purposes, provided that (a) the individual does not actually or constructively
own 10% of more of the total combined voting power of all classes of stock of
the Company entitled to vote and (b) the income on the notes is not effectively
connected with the conduct of a U.S. trade or business by the individual.
Recently enacted U.S. federal tax legislation provides for reductions in
U.S. federal estate tax through 2009 and the elimination of such estate tax
entirely in 2010. Under the legislation, such estate tax would be fully
reinstated, as in effect prior to the reductions, in 2011.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The Company will report to
each non-U.S. holder and the IRS amounts paid on or with respect to the notes
during each calendar year and the amount of tax, if any, withheld from such
payments. Copies of the information returns reporting such interest and
withholding also may be made available to the tax authorities in the country in
which a non-U.S. holder is a resident under the provisions of an applicable
income tax treaty or agreement.
Certain non-U.S. holders of notes may be subject to backup withholding as
described above under "--Taxation of U.S. Holders--Backup Withholding and
Information Reporting."
Treasury regulations provide that backup withholding and information
reporting will not apply to payments on the notes by the Company to a non-U.S.
holder if the non-U.S. holder certifies as to its status as a non-U.S. holder
under penalties of perjury or otherwise establishes an exemption, provided that
neither the Company nor the Company's paying agent has actual knowledge that the
holder is a U.S. person or that any other conditions of the exemption are not,
in fact, satisfied.
Additional backup withholding and information reporting requirements with
respect to the payment of the proceeds from the disposition of a note by a
non-U.S. holder are as follows:
- If the proceeds are paid to or through the U.S. office of a broker, they
generally will be subject to backup withholding and information reporting.
However, no such reporting and withholding is required if (a) the holder
either certifies as to its status as a non-U.S. holder under penalties of
perjury on an IRS Form W-8BEN, (or a suitable substitute or successor
form) or otherwise establishes an exemption; and (b) the broker does not
have actual knowledge that the holder is a U.S. person or that any other
conditions of the exemption are not, in fact, satisfied.
- If the proceeds are paid to or through a non-U.S. office of a broker that
is not a U.S. person or a "U.S. related person," as defined below, they
will not be subject to backup withholding or information reporting.
- If the proceeds are paid to or through a non-U.S. office of a broker that
is either a U.S. person or a U.S. related person, they generally will be
subject to information reporting. However, no such reporting is required
if (a) the holder certifies as to its status as a non-U.S. holder under
penalties of perjury or the broker has certain documentary evidence in its
files as to the non-U.S. holder's foreign status, and (b) the broker has
no actual knowledge to the contrary. Backup withholding will generally not
apply to payments of the proceeds made through a non-U.S. office of a U.S.
person or a U.S. related person.
For purposes of these provisions a "U.S. related person" is:
- a controlled foreign corporation, within the meaning of the Code;
144
<Page>
- a non-U.S. person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment, or, if shorter, for such part of the period that it has been
in existence, is U.S. trade or business income; or
- a non-U.S. partnership if at any time during its taxable year one or more
of its partners are U.S. persons who, in the aggregate, hold more than 50%
of the income or capital interests of the partnership or if, at any time
during its taxable year, the partnership is engaged in the conduct of a
U.S. trade or business.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be allowed as a refund or a credit against such non-U.S.
holder's U.S. federal income tax liability, provided that the required
procedures are followed.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge and represent that it will deliver a
prospectus in connection with any resale of such new notes. This prospectus, as
it may be amended or supplemented from time to time, may be used by certain
broker-dealers (as specified in the registration rights agreement) in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired as a result of market-making activities or other trading
activities. We have agreed that, for a period not to exceed 90 days after the
expiration date, we will make this prospectus, as amended or supplemented
available to any such broker-dealer for use in connection with any such resale.
In addition, until September 23, 2002, all dealers effecting transactions in the
new notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of new notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the expiration date, we will send additional
copies of this prospectus to certain broker-dealers (as specified in the
registration rights agreement) that request such documents in the letter of
transmittal. We have agreed to pay certain expenses incident to the exchange
offer, and will indemnify holders of the notes (including broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the new notes offered hereby and the subsidiary guarantees
will be passed upon for North American Van Lines by Debevoise & Plimpton, New
York, New York, special New York counsel to North American Van Lines. Franci J.
Blassberg, Esq., a member of Debevoise & Plimpton, is married to Joseph L.
Rice III, who is a shareholder of the managing general partner of the general
partner of Clayton, Dubilier & Rice Fund V Limited Partnership.
145
<Page>
EXPERTS
The financial statements of North American Van Lines as of December 31, 2001
and 2000, and for each of the three years ended December 31, 2001 included in
this prospectus have been audited by PricewaterhouseCoopers LLP, independent
auditors, as stated in their report herein, and are included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The combined financial statements of NFC Moving Services Group for the year
ended September 30, 1999 included in this prospectus has been audited by
Ernst & Young, independent auditors, as set forth in their report appearing
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
146
<Page>
INDEX TO FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE
--------
NORTH AMERICAN VAN LINES, INC. CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED):
Condensed Consolidated Balance Sheets at March 31, 2002
and December 31, 2001 (unaudited)....................... F-2
Consolidated Statements of Operations for the three months
ended March 31, 2002 and 2001 (unaudited)............... F-3
Consolidated Statement of Stockholder's Equity for the
three months ended March 31, 2002 (unaudited)........... F-4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2002 and 2001
(unaudited)............................................. F-5
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................. F-6
NORTH AMERICAN VAN LINES, INC. CONSOLIDATED FINANCIAL
STATEMENTS:
Report of Independent Acountants.......................... F-16
Consolidated Balance Sheets at December 31, 2001 and
2000.................................................... F-17
Consolidated Statements of Operations for the years ended
December 31, 2001 and 2000 and December 25, 1999........ F-19
Consolidated Statements of Changes in Stockholder's Equity
for the years ended December 31, 2001 and 2000 and
December 25, 1999....................................... F-20
Consolidated Statements of Cash Flows for the years ended
December 31, 2001 and 2000 and December 25, 1999........ F-21
Notes to Consolidated Financial Statements................ F-22
NORTH AMERICAN VAN LINES, INC. SCHEDULE II: VALUATION AND
QUALIFYING ACCOUNTS........................................ F-61
NFC MOVING SERVICES GROUP COMBINED FINANCIAL STATEMENTS:
Report of Independent Auditors............................ F-62
Combined profit and loss accounts for the year ended
September 30, 1999...................................... F-63
Combined statement of total recognized gains and losses
for the year ended September 30, 1999................... F-64
Combined cash flow statement for the year ended September
30, 1999................................................ F-65
Notes to the combined financial statements................ F-67
</Table>
F-1
<Page>
NORTH AMERICAN VAN LINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2002 AND DECEMBER 31, 2001
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
--------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 25,646 $ 32,119
Accounts and notes receivable, net of allowance for
doubtful accounts of $24,842 and $24,386,
respectively............................................ 225,453 267,112
Other current assets...................................... 39,606 38,289
Deferred and recoverable federal income taxes............. 39,540 39,553
---------- ----------
Total current assets........................................ 330,245 377,073
---------- ----------
Property and equipment, net................................. 165,065 165,367
Goodwill and intangible assets, net......................... 413,229 413,229
Receivable from SIRVA, Inc.................................. 20,104 23,268
Other assets................................................ 113,683 116,877
---------- ----------
Total long-term assets...................................... 712,081 718,741
---------- ----------
Total assets................................................ $1,042,326 $1,095,814
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 10,390 $ 16,958
Current portion of capital lease obligations.............. 4,053 4,006
Revolving credit facility................................. 57,455 47,235
Accounts payable and other current liabilities............ 297,683 334,813
Accrued income tax payable................................ 3,087 2,285
---------- ----------
Total current liabilities................................... 372,668 405,297
---------- ----------
Long-term debt.............................................. 425,414 440,410
Capital lease obligations................................... 16,111 16,366
Due to SIRVA, Inc........................................... 38,515 38,515
Other liabilities........................................... 45,020 43,722
Deferred income taxes....................................... 26,179 29,714
---------- ----------
Total long-term liabilities................................. 551,239 568,727
---------- ----------
Total liabilities........................................... 923,907 974,024
---------- ----------
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding at March 31, 2002 and
December 31, 2001, respectively......................... -- --
Additional paid-in-capital................................ 188,950 188,950
Accumulated other comprehensive loss...................... (18,052) (17,988)
Accumulated deficit....................................... (52,479) (49,172)
---------- ----------
Total stockholder's equity.................................. 118,419 121,790
---------- ----------
Total liabilities and stockholder's equity.................. $1,042,326 $1,095,814
========== ==========
</Table>
See accompanying notes to condensed consolidated financial statements.
F-2
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 2002 MARCH 31, 2001
--------------- ---------------
Operating revenues.......................................... $429,654 $510,371
Operating expenses:
Purchased transportation expense.......................... 254,902 316,609
Other direct transportation expense....................... 83,782 95,345
-------- --------
Total direct expenses....................................... 338,684 411,954
Gross margin................................................ 90,970 98,417
Insurance and claims...................................... 10,827 13,280
Other indirect expense.................................... 2,552 3,371
-------- --------
Total indirect expenses..................................... 13,379 16,651
Selling, general and administrative expenses.............. 72,098 85,891
Restructuring charge (credit)............................. (731) 235
-------- --------
Income (loss) from operations........................... 6,224 (4,360)
Non-operating income (expense).............................. 365 (192)
-------- --------
Income (loss) before interest and taxes................. 6,589 (4,552)
Interest expense............................................ 12,576 15,837
-------- --------
Loss before income taxes.................................... (5,987) (20,389)
Income tax benefit.......................................... (2,680) (25,632)
-------- --------
Income (loss) before cumulative effect of accounting
change................................................ (3,307) 5,243
Cumulative effect of accounting change, net of tax.......... -- (328)
-------- --------
Net income (loss)....................................... $ (3,307) $ 4,915
======== ========
</Table>
See accompanying notes to condensed consolidated financial statements.
F-3
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE ADDITIONAL
TOTAL DEFICIT INCOME (LOSS) COMMON STOCK PAID-IN-CAPITAL
-------- ----------- ------------- ------------ ---------------
Balance at December 31, 2001............... $121,790 $(49,172) $(17,988) $ -- $188,950
Comprehensive income (loss):
Net loss................................. (3,307) (3,307)
Unrealized hedging gain, net of tax of
$496................................... 744 744
Net change in unrealized holding loss on
available-for-sale securities, net of
tax benefit of $(30)................... (44) (44)
Foreign currency translation adjustment,
net of tax benefit $(509).............. (764) (764)
--------
Total comprehensive loss................... (3,371)
-------- -------- -------- --------- --------
Balance at March 31, 2002.................. $118,419 $(52,479) $(18,052) $ -- $188,950
======== ======== ======== ========= ========
</Table>
See accompanying notes to condensed consolidated financial statements.
F-4
<Page>
NORTH AMERICAN VAN LINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 2002 MARCH 31, 2001
--------------- ---------------
Net cash provided by operating activities................... $ 16,058 $ 5,279
-------- --------
Cash flows from investing activities:
Additions of property and equipment....................... (8,585) (9,786)
Proceeds from sale of property and equipment.............. 233 1,482
Purchases of investments.................................. (20,114) (20,010)
Proceeds from maturity or sale of investments............. 27,301 24,798
Other investing activities................................ (333) (301)
-------- --------
Net cash used for investing activities...................... (1,498) (3,817)
-------- --------
Cash flows from financing activities:
Borrowings (repayments) on revolving credit facility,
net..................................................... 11,235 (506)
Change in balance of outstanding checks................... (9,585) (3,828)
Principal payments on long-term debt...................... (21,968) (2,950)
Other financing activities................................ (511) (343)
-------- --------
Net cash used for financing activities...................... (20,829) (7,627)
Effect of translation adjustments on cash................... (204) (178)
-------- --------
Net decrease in cash and cash equivalents................... (6,473) (6,343)
Cash and cash equivalents at beginning of period............ 32,119 43,509
-------- --------
Cash and cash equivalents at end of period.................. $ 25,646 $ 37,166
======== ========
</Table>
See accompanying notes to condensed consolidated financial statements.
F-5
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(1) BASIS OF PRESENTATION
This report covers North American Van Lines, Inc. and its subsidiaries (the
"Company"). On March 7, 2002, the Company's parent, Allied Worldwide, Inc.,
filed a certificate of amendment to its articles of incorporation with the State
of Delaware effecting a change of its name from Allied Worldwide, Inc. to
SIRVA, Inc. ("SIRVA").
The accompanying unaudited condensed consolidated financial statements
should be read together with the Company's audited consolidated financial
statements for the year ended December 31, 2001. Certain information and
footnote disclosures normally included in the aforementioned financial
statements prepared in accordance with generally accepted accounting principles
are condensed or omitted. Management of the Company believes the interim
financial statements include all adjustments, including normal recurring
adjustments, necessary for a fair presentation of the financial condition and
results of operations for the interim periods presented.
On December 31, 2001, the Company and Moveline, Inc. ("Moveline") completed
a merger under an agreement and plan of merger dated as of November 9, 2001,
through a stock-for-stock merger of Moveline and a wholly owned subsidiary of
the Company ("Merger") with such subsidiary as the surviving corporation.
Immediately following the Merger, the Company contributed the surviving
subsidiary to Allied Van Lines, Inc. ("AVL"), another wholly owned subsidiary of
the Company. AVL and that subsidiary were merged, with AVL as the surviving
entity. Prior to the Merger, Clayton, Dubilier and Rice Fund V Limited
Partnership ("Fund V") was the primary stockholder of both Moveline and SIRVA.
In accordance with the accounting rules for mergers of entities under common
control, the Company's merger with Moveline has been accounted for in a manner
similar to a pooling of interest since it was acquired from Fund V, the
controlling shareholder of Moveline and SIRVA. The Company's consolidated
financial statements have been restated to include the combined results of
operations, financial position, and cash flows of Moveline since inception as
though it has always been a part of the Company.
Certain reclassifications have been made to the condensed consolidated
financial statements for the prior periods presented to conform with the
March 31, 2002 presentation.
(2) GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consisted of the following:
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
--------------- ------------------
Trade names, net............................... $165,670 $165,670
Goodwill, net.................................. 247,559 247,559
-------- --------
$413,229 $413,229
======== ========
</Table>
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"), which requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but rather, be tested for impairment at
least annually. The Company adopted the provisions of SFAS 142 effective
January 1, 2002
F-6
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(2) GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
and has discontinued the amortization of goodwill and intangible assets with
indefinite useful lives. The carrying amount of goodwill attributable to each
reportable business segment was as follows:
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
--------------- ------------------
Van Line Network............................... $118,459 $118,459
Logistics Services............................. 13,604 13,604
Moving and Storage Services.................... 115,496 115,496
-------- --------
$247,559 $247,559
======== ========
</Table>
Trade names consist of the brand names northAmerican, Allied, Pickfords and
Allied Pickfords. These intangible assets have been identified as having
indefinite useful lives and were tested for impairment consistent with the
provisions of SFAS 142. The Company completed such testing and determined that
there was no impairment of intangible assets.
The following represents a comparison of results for the three months ended
March 31, 2002 with the three months ended March 31, 2001, adjusted to exclude
amortization expense:
<Table>
<Caption>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
------------------ ------------------
Net income (loss), as reported........... $(3,307) $ 4,915
Amortization of goodwill and trade
names.................................. -- 2,762
Income tax provision..................... -- (1,105)
------- -------
Adjusted net income (loss)............... $(3,307) $ 6,572
======= =======
</Table>
(3) INCOME TAXES
The Company's estimated provision for income taxes differs from the amount
computed by applying the federal and state statutory rates. This is primarily
due to (1) the non-deductibility of certain items expensed for book purposes and
(2) limitations that exist on the availability of certain foreign income tax
credits. These items create taxable income that is greater than income reported
for financial statement purposes.
F-7
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(4) LONG-TERM DEBT
Long-term debt consisted of the following:
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
--------------- ------------------
Note payable--Tranche A........................ $124,709 $135,000
Note payable--Tranche B........................ 159,887 171,500
Senior Subordinated Notes...................... 150,000 150,000
Other.......................................... 1,208 868
-------- --------
Total debt..................................... 435,804 457,368
Less current maturities........................ 10,390 16,958
-------- --------
Total long-term debt........................... $425,414 $440,410
======== ========
</Table>
On March 28, 2002, the Company made a $21,904 prepayment of Tranche A and
Tranche B debt due to excess cash flow, as defined in the credit agreement, in
2001. A total of $4,188 replaced principal payments due at that time, with the
remaining $17,716 reducing future principal payments.
(5) COMMITMENTS AND CONTINGENCIES
(A) LITIGATION
The Company and certain subsidiaries are defendants in numerous lawsuits
relating principally to motor carrier operations. In the opinion of management,
after consulting with its legal counsel, the amount of the Company's ultimate
liability resulting from these matters will not materially affect the Company's
financial position, results of operations or liquidity, however, such liability
may be material to any given quarter.
(B) ENVIRONMENTAL MATTERS
The Company has been named as a potentially responsible party ("PRP") in two
environmental cleanup proceedings by federal or state authorities and one
additional environmental clean-up proceeding by a group of PRP's. The suits are
brought under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, or other federal or state statutes. Based on
all known information, it is estimated that the settlement cost of each PRP site
would not be materially or significantly larger than the litigation reserves
established, which totaled $35 as of March 31, 2002 and December 31, 2001,
respectively. It is possible that additional claims or lawsuits involving now
unidentified environmental sites may arise in the future.
The Company owns or has owned and leases or has leased facilities at which
underground storage tanks for diesel fuel are located and operated. Management
believes that the Company has taken the appropriate and necessary action with
regard to releases of diesel fuel that have occurred. Based on its assessment of
the facts and circumstances now known and after consulting with its legal
counsel, management believes that it has recorded appropriate estimates of
liability for those environmental matters of which the Company is aware.
Further, management believes it is unlikely that any identified matters, either
individually or in aggregate, will have a material effect on the Company's
financial position,
F-8
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(5) COMMITMENTS AND CONTINGENCIES (CONTINUED)
results of operations or liquidity. As conditions may exist on these properties
related to environmental problems that are latent or undisclosed, there can be
no assurance that the Company will not incur liabilities or costs, the amount of
which cannot be estimated reliably at this time.
(C) PURCHASE COMMITMENTS
The Company has entered into certain purchase commitments primarily for
trailers and software licenses in the amount of $8,201 and $9,844 as of
March 31, 2002 and December 31, 2001, respectively.
(6) OPERATING SEGMENTS
The tables below represent information about revenues, income (loss) from
operations and total assets by segment used by the chief decision-makers of the
Company:
<Table>
<Caption>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 2002 MARCH 31, 2001
--------------- ---------------
Revenues
Van Line Network.......................................... $235,616 $291,154
Logistics Services........................................ 114,881 140,771
Moving and Storage Services............................... 79,157 78,446
Corporate................................................. -- --
-------- --------
Consolidated revenues....................................... $429,654 $510,371
======== ========
Income (loss) from operations
Van Line Network.......................................... $ 3,052 $ (4,432)
Logistics Services........................................ 871 (2,811)
Moving and Storage Services............................... 2,301 2,883
Corporate................................................. -- --
-------- --------
Consolidated income (loss) from operations.................. $ 6,224 $ (4,360)
======== ========
</Table>
<Table>
<Caption>
AS OF
------------------------------------
MARCH 31, 2002 DECEMBER 31, 2001
--------------- ------------------
Total assets
Van Line Network.......................................... $ 410,821 $ 441,296
Logistics Services........................................ 174,751 186,046
Moving and Storage Services............................... 412,261 416,634
Corporate................................................. 44,493 51,838
---------- ----------
Consolidated total assets................................... $1,042,326 $1,095,814
========== ==========
</Table>
F-9
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(7) RESTRUCTURING
The following table provides details of restructuring for the three months
ended March 31, 2002:
<Table>
<Caption>
RESTRUCTURING RESTRUCTURING
ACCRUAL AS OF RESTRUCTURING ACCRUAL AS OF
DECEMBER 31, 2001 CREDIT PAYMENTS MARCH 31, 2002
------------------ ------------- -------- ---------------
LOGISTICS PARTS CENTERS
Severance cost............ $ 40 $ -- $ (30) $ 10
Building leases........... 2,117 (731) (254) 1,132
Asset impairment.......... 80 -- (61) 19
------ ----- ----- ------
Total restructuring
cost.................... $2,237 $(731) $(345) $1,161
====== ===== ===== ======
</Table>
In June 2001, the Company's Logistics Services operating segment established
a program to exit the Parts Center business. The charges included severance and
employee benefit costs for 293 employees, lease and asset impairment costs to
shut down and exit the Parts Center business by the end of 2001. Due to lease
terms and severance agreements, certain payments will continue through
September 2005. During the three months ended March 31, 2002, the restructuring
accrual was reduced when the Company was able to sublease certain Parts Centers
facilities sooner than originally estimated.
(8) SUBSEQUENT EVENTS
On April 12, 2002, the Company purchased the National Association of
Independent Truckers ("NAIT"), a leading provider of insurance services to
independent contract truck drivers, for $30,000 in cash, and a deferred amount
of $3,000 payable subject to the completion of certain operating performance
objectives during 2002 and 2003. NAIT is an association of more than 11,000
independent contract truck drivers that provides its members with occupational
accident, physical damage and non-trucking liability insurance, as well as
access to a suite of professional services. The purchase price was funded from
the sale of investments, existing cash balances and $20,000 of cash from the
sale of 140,846 shares of SIRVA's common stock to Clayton, Dubilier and Rice
Fund VI Limited Partnership, a Cayman Islands exempted limited partnership
managed by Clayton, Dubilier and Rice, Inc. ("Fund VI"), and an affiliate of
Fund V, the controlling shareholder of SIRVA.
On May 3, 2002, SIRVA purchased substantially all the assets of Cooperative
Resource Services, Ltd., a business that provides comprehensive relocation
services to companies and their employees, including home sale services,
relocation logistics services and mortgage lending services. A wholly-owned
subsidiary of the Company purchased all of such business' acquired assets other
than assets relating to certain mortgage lending operations of the seller. The
mortgage lending operations of the seller were purchased by a direct
wholly-owned subsidiary of SIRVA. Subject to certain adjustments, the combined
cash purchase price for the acquisitions was approximately $60,000, of which
$3,500 was paid for the assets of the mortgage lending operations. Approximately
$45,000 of the purchase price was paid in cash and $15,000 was paid in notes
issued by the Company. In addition, certain liabilities relating to the acquired
business were assumed in connection with the acquisition including $26,572 of
indebtedness under a revolving credit facility used to fund the mortgage lending
operations, which was assumed by the SIRVA acquisition
F-10
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(8) SUBSEQUENT EVENTS (CONTINUED)
subsidiary. The cash purchase price for the acquisition, as well as
approximately $24,100 of other indebtedness of the acquired business that was
refinanced as part of the acquisition, were financed with proceeds of $40,000 of
cash from the sale of 281,691 shares of SIRVA's common stock to Fund VI and the
incurrence of $50,000 additional senior indebtedness.
(9) SUPPLEMENTAL INFORMATION
The following summarized consolidating balance sheets, statements of
operations and statements of cash flows were prepared to segregate such
financial statements between those entities that have guaranteed the Company's
senior subordinated notes ("Guarantor" entities) and those entities that did not
guarantee such debt ("Non-Guarantor" entities).
Consolidated condensed balance sheet data as of March 31, 2002 and
December 31, 2001 is summarized as follows:
<Table>
<Caption>
MARCH 31, 2002
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Current assets:
Accounts and notes receivable, net... $ 94,048 $ 79,598 $ 59,600 $ (7,793) $ 225,453
Other current assets................. 37,249 24,534 43,080 (71) 104,792
-------- -------- -------- --------- ----------
Total current assets................... 131,297 104,132 102,680 (7,864) 330,245
-------- -------- -------- --------- ----------
Property and equipment, net............ 67,890 16,585 80,590 -- 165,065
Goodwill and intangible assets, net.... 409,994 3,235 -- -- 413,229
Other assets........................... 319,098 6,051 266,178 (457,540) 133,787
-------- -------- -------- --------- ----------
Total assets........................... $928,279 $130,003 $449,448 $(465,404) $1,042,326
======== ======== ======== ========= ==========
Current liabilities.................... $145,378 $111,055 $120,652 $ (4,417) $ 372,668
Long-term debt and capital lease
obligations.......................... 433,395 229 7,901 -- 441,525
Other liabilities...................... 206,235 2,615 -- (99,136) 109,714
-------- -------- -------- --------- ----------
Total liabilities...................... 785,008 113,899 128,553 (103,553) 923,907
Stockholder's equity................... 143,274 16,104 320,892 (361,851) 118,419
-------- -------- -------- --------- ----------
Total liabilities and stockholder's
equity............................... $928,282 $130,003 $449,445 $(465,404) $1,042,326
======== ======== ======== ========= ==========
</Table>
F-11
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(9) SUPPLEMENTAL INFORMATION (CONTINUED)
<Table>
<Caption>
DECEMBER 31, 2001
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Current assets:
Accounts and notes receivable, net... $118,345 $ 92,560 $ 63,795 $ (7,588) $ 267,112
Other current assets................. 43,935 21,701 44,619 (294) 109,961
-------- -------- -------- --------- ----------
Total current assets................... 162,280 114,261 108,414 (7,882) 377,073
-------- -------- -------- --------- ----------
Property and equipment, net............ 72,523 11,687 81,157 -- 165,367
Goodwill and intangible assets, net.... 409,993 3,236 -- -- 413,229
Other assets........................... 279,378 151,257 374,030 (664,520) 140,145
-------- -------- -------- --------- ----------
Total assets........................... $924,174 $280,441 $563,601 $(672,402) $1,095,814
======== ======== ======== ========= ==========
Current liabilities.................... $152,406 $138,820 $122,525 $ (8,454) $ 405,297
Long-term debt and capital lease
obligations.......................... 448,225 226 8,325 -- 456,776
Other liabilities...................... 82,809 25,199 -- 3,943 111,951
-------- -------- -------- --------- ----------
Total liabilities...................... 683,440 164,245 130,850 (4,511) 974,024
Stockholder's equity................... 240,734 116,196 432,751 (667,891) 121,790
-------- -------- -------- --------- ----------
Total liabilities and stockholder's
equity............................... $924,174 $280,441 $563,601 $(672,402) $1,095,814
======== ======== ======== ========= ==========
</Table>
F-12
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(9) SUPPLEMENTAL INFORMATION (CONTINUED)
Consolidated condensed statements of operations data for the three months
ended March 31, 2002 and 2001 are summarized as follows:
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31, 2002
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Operating revenues..................... $151,574 $30,910 $265,002 $(17,832) $429,654
Total operating expenses............... 151,637 32,107 257,518 (17,832) 423,430
-------- ------- -------- -------- --------
Income (loss) from operations.......... (63) (1,197) 7,484 -- 6,224
Non-operating income (expense) and
minority interest.................... 1,101 -- (736) -- 365
-------- ------- -------- -------- --------
Income (loss) before interest, income
taxes and accounting change.......... 1,038 (1,197) 6,748 -- 6,589
Interest expense (income).............. 11,675 36 (9,635) 10,500 12,576
-------- ------- -------- -------- --------
Income (loss) before income taxes and
accounting change.................... (10,637) (1,233) 16,383 (10,500) (5,987)
Provision (benefit) for income taxes... (5,721) 171 2,870 -- (2,680)
-------- ------- -------- -------- --------
Net income (loss)...................... $ (4,916) $(1,404) $ 13,513 $(10,500) $ (3,307)
======== ======= ======== ======== ========
</Table>
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31, 2001
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Operating revenues..................... $191,567 $38,759 $294,175 $(14,130) $510,371
Total operating expenses............... 198,253 38,332 292,343 (14,197) 514,731
-------- ------- -------- -------- --------
Income (loss) from operations.......... (6,686) 427 1,832 67 (4,360)
Non-operating expense and minority
interest............................. 7 137 48 -- 192
-------- ------- -------- -------- --------
Income (loss) before interest and
income taxes......................... (6,693) 290 1,784 67 (4,552)
Interest expense (income).............. 16,302 40 (11,077) 10,572 15,837
-------- ------- -------- -------- --------
Income (loss) before income taxes...... (22,995) 250 12,861 (10,505) (20,389)
Provision (benefit) for income taxes... (26,971) 202 1,137 -- (25,632)
-------- ------- -------- -------- --------
Income (loss) before accounting
change............................... 3,976 48 11,724 (10,505) 5,243
Cumulative effect of accounting change,
net of tax........................... -- -- (328) -- (328)
-------- ------- -------- -------- --------
Net income (loss)...................... $ 3,976 $ 48 $ 11,396 $(10,505) $ 4,915
======== ======= ======== ======== ========
</Table>
F-13
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(9) SUPPLEMENTAL INFORMATION (CONTINUED)
Consolidated condensed statements of cash flows data for the three months
ended March 31, 2002 and 2001 are summarized as follows:
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31, 2002
-------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS CONSOLIDATED
-------- ---------- ---------- ------------
Net cash provided by (used for) operating
activities...................................... $ 13,296 $ 5,371 $ (2,609) $ 16,058
-------- ------- -------- --------
Cash flows from investing activities:
Additions of property and equipment............. (2,326) (1,909) (4,350) (8,585)
Proceeds from sale of property and equipment.... 65 147 21 233
Purchases of investments........................ -- -- (20,114) (20,114)
Proceeds from maturity or sale of investments... -- -- 27,301 27,301
Other investing activites....................... (134) (199) -- (333)
-------- ------- -------- --------
Net cash provided by (used for) investing
activities...................................... (2,395) (1,961) 2,858 (1,498)
-------- ------- -------- --------
Cash flows from financing activities:
Borrowings (repayments) on revolving credit
facility, net................................. 11,600 -- (365) 11,235
Change in balance of outstanding checks......... (3,874) (2,802) (2,909) (9,585)
Principal payments on long-term debt............ (21,968) -- -- (21,968)
Other financing activities...................... (269) -- (242) (511)
-------- ------- -------- --------
Net cash provided by (used for) financing
activities...................................... (14,511) (2,802) (3,516) (20,829)
-------- ------- -------- --------
Effect of translation adjustment on cash.......... -- -- (204) (204)
-------- ------- -------- --------
Net increase (decrease) in cash and cash
equivalents..................................... (3,610) 608 (3,471) (6,473)
Cash and cash equivalents at beginning of
period.......................................... 5,687 4,054 22,378 32,119
-------- ------- -------- --------
Cash and cash equivalents at end of period........ $ 2,077 $ 4,662 $ 18,907 $ 25,646
======== ======= ======== ========
</Table>
F-14
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2002
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(9) SUPPLEMENTAL INFORMATION (CONTINUED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31, 2001
-------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS CONSOLIDATED
-------- ---------- ---------- ------------
Net cash provided by (used for) operating
activities....................................... $10,305 $(4,087) $ (939) $ 5,279
------- ------- -------- --------
Cash flows from investing activities:
Additions of property and equipment.............. (4,964) (735) (4,087) (9,786)
Proceeds from sale of property and equipment..... 170 -- 1,312 1,482
Purchases of investments......................... -- -- (20,010) (20,010)
Proceeds from maturity or sale of investments.... -- -- 24,798 24,798
Other investing activities....................... (301) -- -- (301)
------- ------- -------- --------
Net cash provided by (used for) investing
activities....................................... (5,095) (735) 2,013 (3,817)
------- ------- -------- --------
Cash flows from financing activities:
Repayments on revolving credit facility, net..... (506) -- -- (506)
Change in balance of outstanding checks.......... (1,345) 8,015 (10,498) (3,828)
Principal payments on long-term debt............. (2,950) -- -- (2,950)
Other financing activities....................... (480) 137 -- (343)
------- ------- -------- --------
Net cash provided (used for) by financing
activities....................................... (5,281) 8,152 (10,498) (7,627)
------- ------- -------- --------
Effect of translation adjustment on cash........... -- -- (178) (178)
------- ------- -------- --------
Net increase (decrease) in cash and cash
equivalents...................................... (71) 3,330 (9,602) (6,343)
Cash and cash equivalents at beginning of period... 2,027 12,519 28,963 43,509
------- ------- -------- --------
Cash and cash equivalents at end of period......... $ 1,956 $15,849 $ 19,361 $ 37,166
======= ======= ======== ========
</Table>
- ------------------------
(1) Parent includes the accounts of North American Van Lines, Inc., a Delaware
corporation and the issuer of the debt.
(2) Total Guarantors include the accounts of the following subsidiaries of North
American Van Lines, Inc. or its subsidiary, Allied Van Lines, Inc.; Fleet
Insurance Management, Inc., an Indiana corporation; FrontRunner
Worldwide, Inc., a Delaware corporation; NACAL, Inc., a California
corporation; NAVTRANS International Freight Forwarding, Inc., an Indiana
corporation; Federal Traffic Services, Inc., an Indiana corporation; North
American Logistics. Ltd., an Indiana corporation; North American Van Lines
of Texas, Inc., a Texas corporation; Relocation Management Systems, Inc., a
Delaware corporation; Great Falls North American, Inc., a Montana
corporation; Allied Van Lines, Inc., a Delaware corporation; Allied
International N.A., Inc. a Delaware corporation; A Relocation Solutions
Management Company, Inc., a Delaware corporation; Vanguard Insurance
Agency, Inc., an Illinois corporation; Allied Van Lines Terminal
Company, Inc., a Delaware corporation; Meridian Mobility Resources, Inc., a
Delaware corporation; Allied Transporation Forwarding, Inc., an Illinois
corporation; and Allied Freight Forwarding, Inc., a Delaware corporation.
Each Guarantor is a wholly owned subsidiary of North American Van
Lines, Inc. or its subsidiary, Allied Van Lines, Inc. and will jointly and
severally, irrevocably and fully and unconditionally guarantee the punctual
payment of such debt used in connection with the Allied acquisition.
F-15
<Page>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Allied Worldwide, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of North
American Van Lines, Inc. and its subsidiaries at December 31, 2001 and
December 31, 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. In
addition, the accompanying financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements,
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
[LOGO]
Chicago, Illinois
March 4, 2002
F-16
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 32,119 $ 43,509
Short-term investments.................................... 5,984 3,378
Accounts and notes receivable, net of allowance for
doubtful accounts of $24,386 and $26,721,
respectively............................................ 267,112 377,965
Current portion of contracts receivable, net of valuation
allowance of $367 and $255, respectively................ 7,080 9,438
Supplies inventory........................................ 7,980 8,280
Resale equipment inventory................................ 3,373 8,530
Prepaid expenses and other current assets................. 13,872 12,029
Deferred income taxes..................................... 37,051 38,719
Federal income tax recoverable............................ 2,502 1,126
---------- ----------
Total current assets........................................ 377,073 502,974
---------- ----------
Long-term portion of contracts receivable................... 10,187 17,407
Long-term portion of notes receivable....................... 1,601 3,210
Investments................................................. 60,267 56,116
Property and equipment, net................................. 165,367 158,651
Deferred agent contract costs............................... 13,526 16,813
Goodwill and intangible assets, net......................... 413,229 410,257
Other assets................................................ 54,564 51,174
---------- ----------
Total long-term assets...................................... 718,741 713,628
---------- ----------
Total assets................................................ $1,095,814 $1,216,602
========== ==========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-17
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 16,958 $ 11,800
Current portion of capital lease obligations.............. 4,006 2,009
Revolving credit facility................................. 47,235 85,261
Accounts payable.......................................... 61,009 71,679
Outstanding checks........................................ 26,575 30,761
Accrued transportation expense............................ 66,532 100,956
Deferred credits.......................................... 25,084 20,679
Compensation and benefits................................. 22,137 29,092
Other current liabilities................................. 54,854 57,776
Insurance reserves and accruals........................... 78,622 75,626
Accrued income tax payable................................ 2,285 3,652
---------- ----------
Total current liabilities................................... 405,297 489,291
---------- ----------
Long-term debt............................................ 440,410 456,721
Capital lease obligations................................. 16,366 6,798
Insurance reserves and accruals........................... 6,985 8,973
Accrued compensation and benefits......................... 36,737 32,273
Due to Allied Worldwide, Inc.............................. 38,515 38,265
Deferred income taxes..................................... 29,714 38,470
---------- ----------
Total long-term liabilities................................. 568,727 581,500
---------- ----------
Total liabilities........................................... 974,024 1,070,791
---------- ----------
Commitments and contingencies
Minority interest........................................... -- 727
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding at December 31, 2001 and 2000,
respectively............................................ -- --
Additional paid-in-capital................................ 188,950 188,950
Accumulated other comprehensive loss...................... (17,988) (5,641)
Accumulated deficit....................................... (49,172) (38,225)
---------- ----------
Total stockholder's equity.................................. 121,790 145,084
---------- ----------
Total liabilities and stockholder's equity.................. $1,095,814 $1,216,602
========== ==========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-18
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND DECEMBER 25, 1999
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
----------------- ----------------- -----------------
Operating revenues........................... $2,249,303 $2,378,694 $1,159,787
Operating expenses:
Purchased transportation expense........... 1,439,279 1,560,317 732,560
Other direct transportation expense........ 373,089 371,765 186,538
---------- ---------- ----------
Total direct expenses........................ 1,812,368 1,932,082 919,098
Gross margin................................. 436,935 446,612 240,689
Insurance and claims....................... 52,829 61,469 37,307
Other indirect expense..................... 9,786 12,907 8,949
---------- ---------- ----------
Total indirect expenses...................... 62,615 74,376 46,256
General and administrative expense......... 305,229 306,584 183,325
Goodwill amortization...................... 10,906 10,948 3,126
Restructuring and other unusual charge..... 4,883 4,859 9,099
---------- ---------- ----------
Income (loss) from operations............ 53,302 49,845 (1,117)
Non-operating income (expense) and minority
interest................................... (51) 318 (468)
---------- ---------- ----------
Income (loss) before interest, income
taxes, extraordinary item and cumulative
effect of accounting change................ 53,251 50,163 (1,585)
Interest expense............................. 62,001 67,251 21,409
---------- ---------- ----------
Loss before income taxes, extraordinary
item and cumulative effect of accounting
change..................................... (8,750) (17,088) (22,994)
Provision (benefit) for income taxes......... 1,869 (9) (6,447)
---------- ---------- ----------
Loss before extraordinary item and
cumulative effect of accounting change..... (10,619) (17,079) (16,547)
Extraordinary loss on debt extinguishment,
net of tax................................. -- -- (3,387)
---------- ---------- ----------
Loss before cumulative effect of accounting
change..................................... (10,619) (17,079) (19,934)
Cumulative effect of accounting change, net
of tax..................................... (328) -- --
---------- ---------- ----------
Net loss................................... $ (10,947) $ (17,079) $ (19,934)
========== ========== ==========
</Table>
See accompanying notes to condensed consolidated financial statements.
F-19
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND DECEMBER 25, 1999
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE COMMON ADDITIONAL
TOTAL DEFICIT INCOME (LOSS) STOCK PAID-IN-CAPITAL
-------- ----------- ------------- --------- ---------------
Balance at December 26, 1998................. $ 63,650 $ (1,212) $ (138) $ -- $ 65,000
-------- -------- -------- --------- --------
Capital contribution from parent............. 123,950 123,950
Comprehensive income (loss):
Net loss................................... (19,934) (19,934)
Net change in unrealized holding gain on
available-for-sale securities.............. 288 288
Minimum pension liability.................. (111) (111)
Foreign currency translation adjustment.... (175) (175)
-------- -------- -------- --------- --------
Total comprehensive loss..................... (19,932)
-------- -------- -------- --------- --------
Balance at December 25, 1999................. 167,668 (21,146) (136) -- 188,950
-------- -------- -------- --------- --------
Comprehensive income (loss):
Net loss................................... (17,079) (17,079)
Net change in unrealized holding gain on
available-for-sale securities, net of tax
of $308.................................... 3 3
Minimum pension liability, net of tax
benefit of $(223).......................... (224) (224)
Foreign currency translation adjustment,
net of tax benefit of $(3,846)............. (5,284) (5,284)
-------- -------- -------- --------- --------
Total comprehensive loss..................... (22,584)
-------- -------- -------- --------- --------
Balance at December 31, 2000................. 145,084 (38,225) (5,641) -- 188,950
-------- -------- -------- --------- --------
Comprehensive income (loss):
Net loss..................................... (10,947) (10,947)
Derivative transactions:
Cumulative effect of accounting change, net
of tax of $219............................. 328 328
Unrealized hedging loss, net of tax benefit
of $(1,551)................................ (2,326) (2,326)
Net change in unrealized holding loss on
available-for-sale securities, net of tax
benefit of $(104).......................... (157) (157)
Minimum pension liability, net of tax benefit
of $(5,424)................................ (8,136) (8,136)
Foreign currency translation adjustment, net
of tax benefit of $(1,371)................. (2,056) (2,056)
-------- -------- -------- --------- --------
Total comprehensive loss..................... (23,294)
-------- -------- -------- --------- --------
Balance at December 31, 2001................. $121,790 $(49,172) $(17,988) $ -- $188,950
======== ======== ======== ========= ========
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-20
<Page>
NORTH AMERICAN VAN LINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND DECEMBER 25, 1999
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 25,
2001 2000 1999
-------------- -------------- --------------
Cash flows from operating activities:
Net loss before extraordinary item and cumulative effect
of accounting change.................................... $(10,619) $(17,079) $(16,547)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Cumulative effect of accounting change.................... (328) -- --
Extraordinary item........................................ -- -- (3,387)
Depreciation.............................................. 33,536 38,021 25,591
Amortization.............................................. 17,706 18,388 12,373
Provision for losses on accounts and notes receivable..... 959 3,425 724
Deferred income taxes..................................... (7,088) (25,387) (3,136)
(Gain)/loss on sale of property and equipment, net........ 1,053 (6,144) 115
Loss on sale of subsidiary................................ -- -- 200
Change in operating assets and liabilities, net of effect
of acquisition:
Accounts and notes receivable........................... 97,893 (66,476) (12,606)
Contracts receivable.................................... 9,577 12,776 (8,072)
Prepaid expenses and other current assets............... 11,893 7,114 (12,641)
Federal income tax recoverable.......................... (1,376) 4,548 (5,674)
Accounts payable........................................ (10,372) 9,415 15,709
Other current liabilities............................... (43,639) 38,088 (619)
Insurance reserves and accruals......................... 1,008 8,045 12,034
Accrued income taxes payable............................ (1,368) (23) (673)
Other long-term assets and liabilities.................. 12,488 28,102 8,196
-------- -------- --------
Net cash provided by operating activities................... 111,323 52,813 11,587
-------- -------- --------
Cash flows from investing activities:
Additions of property and equipment....................... (48,348) (55,377) (12,727)
Proceeds from sale of property and equipment.............. 3,477 15,592 3,451
Purchases of available-for-sale securities................ (86,660) (55,347) (4,047)
Purchases of held-to-maturity securities.................. (645) (594) --
Proceeds from sale of available-for-sale securities....... 81,305 49,353 2,083
Proceeds from maturity of held-to-maturity securities..... 600 -- 500
Payment of agent contract costs........................... (1,371) (2,233) (1,825)
Acquisitions, net of cash acquired........................ (4,000) (5,780) (396,371)
Settlement of acquisition purchase price dispute.......... (17,357) -- --
-------- -------- --------
Net cash used for investing activities...................... (72,999) (54,386) (408,936)
-------- -------- --------
Cash flows from financing activities:
Debt issuance costs....................................... -- -- (19,208)
Borrowings (repayments) on revolving credit facility and
notes payable, net........................................ (37,943) 18,514 41,929
Change in balance of outstanding checks................... (4,082) 10,166 2,578
Borrowings on long-term debt.............................. 672 -- 475,000
Sale of equipment note receivable......................... 6,317 11,121 --
Principal payments on long-term debt...................... (11,833) (6,811) (143,018)
Principal payments under capital lease obligations........ (2,482) (4,406) (87)
Payment for transfer of insurance liabilities............. -- (6,672) (10,865)
Proceeds from capital contribution from parent............ -- -- 73,950
Minority interest......................................... (243) (99) 326
-------- -------- --------
Net cash (used for) provided by financing activities........ (49,594) 21,813 420,605
-------- -------- --------
Effect of translation adjustments on cash................... (120) (1,886) (175)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (11,390) 18,354 23,081
Cash and cash equivalents at beginning of period............ 43,509 25,155 2,074
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 32,119 $ 43,509 $ 25,155
======== ======== ========
Supplemental disclosure of cash flow information -- cash
paid during the years ended December 31, 2001 and 2000 and
December 25, 1999:
Interest.................................................. $ 56,649 $ 64,892 $ 13,013
Income taxes.............................................. $ 3,159 $ 4,697 $ 672
</Table>
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND BUSINESS DESCRIPTION
On March 29, 1998, Allied Worldwide, Inc. ("Allied Worldwide") acquired all
of the capital stock of North American Van Lines, Inc. (the "Company") from
Norfolk Southern Corporation ("NS") and J.P. Morgan Ventures Corporation (the
"1998 Acquisition"). Allied Worldwide was formed by Clayton, Dubilier and Rice
Fund V Limited Partnership ("Fund V"), a private investment fund that is managed
by Clayton, Dubilier and Rice, Inc. ("CD&R"). The Company is a wholly-owned
subsidiary of Allied Worldwide. The 1998 Acquisition was accounted for as a
purchase and resulted in a new basis of accounting for the Company, based upon
the purchase of Allied Worldwide.
On November 19, 1999, the Company completed the acquisition of NFC Moving
Services Group (the "Allied Acquisition", see Note 2) and now operates as a
global services provider under the brand names of North American Van Lines,
Global Van Lines, Allied Van Lines, Pickfords and Allied Pickfords with
operations located throughout the United States, Canada, portions of Europe, the
United Kingdom and Australia, New Zealand and other Asia/Pacific locations. The
Company conducts its U.S. and Canadian operations primarily through a network of
exclusive agents with approximately 1,300 locations in the U.S. and Canada and
nearly 600 affiliated representatives on an international basis. The Company
conducts its other foreign business primarily through units which it owns and
operates directly, using selected other affiliated representatives to complete
its service offering on a worldwide basis. The Company is not dependent on any
single or major group of customers or suppliers for its operating revenues.
The Company has wholly-owned subsidiaries which operate as multiple-line
property and commercial liability insurance companies under the provisions of
the insurance laws of the State of Illinois and the country of Ireland and
insure owner-operators, agents of the Company and various other parties in the
transportation industry against loss from certain risks, primarily cargo
warehousing, commercial auto physical damage, commercial auto liability and
general liability.
(B) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions have
been eliminated in consolidation.
During the fourth quarter 2001, the Company purchased the remaining 49% of a
limited liability company, Manufacturing Support Services, LLC, ("MSS LLC") that
it did not already own for $4,000. Prior to the purchase, the results of MSS LLC
and related minority interest were reflected in the consolidated financial
statements of the Company.
(C) CASH EQUIVALENTS
Cash equivalents are highly liquid investments purchased three months or
less from original maturity.
(D) CONTRACTS RECEIVABLE AND RESALE EQUIPMENT INVENTORY
In the normal course of business, the Company sells tractors, trailers and
other equipment ("resale equipment inventory") to its agents and to
owner-operators under conditional sales agreements
F-22
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
("contracts receivable"). Sales of equipment are financed by the Company,
generally over a four-year period. Resale equipment inventory is recorded at the
lower of cost or net realizable value.
(E) SUPPLIES INVENTORY
Supplies inventory consists of pallets, blanket stock, crates, replacement
and repair parts and tires and is valued at the lower of cost, determined using
a first-in, first-out method, or market.
(F) INVESTMENTS
Investments consist of U.S. Treasury and corporate debt securities and joint
ventures. Investments are classified as current or noncurrent based on their
maturities and/or the Company's expectations of sales and redemptions in the
following year. Interest and dividends on debt and equity securities are
included in income as earned. The Company classifies its debt securities in one
of two categories: available-for-sale or held-to-maturity. Held-to-maturity
securities are those securities in which the Company has the ability and intent
to hold the securities until maturity. All other securities are classified as
available-for-sale.
Available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts. Unrealized holding gains and losses, net of
the related tax effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of accumulated other
comprehensive income until realized. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific identification basis.
(G) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the respective assets.
The estimated useful lives used in computing depreciation are summarized as
follows:
<Table>
<Caption>
USEFUL LIFE
--------------
Buildings and improvements.................................. 20 to 40 years
Transportation equipment.................................... 4 to 15 years
Warehouse equipment......................................... 5 to 10 years
Computer equipment and software............................. 3 to 5 years
Other....................................................... 1 to 10 years
</Table>
Transportation equipment includes tractors, straight trucks, trailers, van
equipment, containers and satellite-communication equipment. Salvage values are
only calculated on tractors, straight trucks and trailers.
Leased property and equipment meeting certain criteria is capitalized and
the present value of the related lease payments is recorded as a liability.
Depreciation of capitalized leased assets is computed on a straight-line basis
over the term of the lease.
F-23
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The amount of internally developed software, representing primarily the cost
of independent contractor developed software, that was capitalized during the
years ended December 31, 2001 and 2000 was $10,370 and $5,675, respectively, and
is included in computer equipment and software. The amount of capitalized
interest related to internally developed software at December 31, 2001 and 2000
was $578 and $183, respectively. Amortization of capitalized software costs for
the years ended December 31, 2001 and 2000 and December 25, 1999 was $2,513,
$482 and $244, respectively.
Repairs and maintenance expenditures are charged to expenses as incurred.
(H) INTANGIBLE ASSETS
Intangible assets consist of trade names and goodwill. Trade names and
goodwill are primarily amortized on a straight-line basis over their estimated
lives of 40 years.
(I) LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of" ("SFAS 121"), long-lived assets held and used by the Company,
including intangible assets, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. For purposes of evaluating the recoverability of long-lived
assets, the recoverability test is performed using undiscounted net cash flows
of the assets.
(J) DEFERRED AGENT CONTRACT COSTS
Deferred agent contract costs are payments made to certain agents for
entering into long-term contracts with the Company. These payments are
capitalized and amortized over the lives of the related contracts, which
generally range from 3 to 10 years.
(K) DEFERRED CREDITS
Included in deferred credits are unearned premiums related to the Company's
insurance business. Policies are issued and income is recognized over the life
of the policy, generally 12 months.
(L) INSURANCE RESERVES AND ACCRUALS
Concurrent with the 1998 Acquisition, the Company transferred its casualty
and workers' compensation liabilities for claims incurred in 1997 and prior to
American International Group for $38,600 payable in installments over a
three-year period. At the same time the Company purchased first dollar coverage
for principally all insurable business risks except cargo damage and delay
claims. The Company estimates costs relating to cargo damage and delay claims
based on actuarial methods.
(M) REVENUE RECOGNITION
The Company recognizes estimated gross revenue to be invoiced to the
transportation customer and all related transportation expenses on the date a
shipment is delivered or services are completed. The
F-24
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
estimate of revenue remains in a receivable account called Delivered Not
Processed ("DNP") until the customer is invoiced. Concurrent with the DNP
estimate, the Company recognizes an accrual for Purchased Transportation
Expenses ("PTE") to account for the estimated costs of packing services,
transportation expenses and other such costs associated with the service
delivery. The estimate for PTE is not reversed until the Company receives actual
charges.
(N) FOREIGN CURRENCY TRANSLATION
A majority of the Company's foreign operations use the local currency as
their functional currency. Assets and liabilities of these operations are
translated to U.S. dollars at the exchange rates in effect on the balance sheet
date. Income statement items are translated at the average exchange rate. The
impact of currency fluctuation is included in stockholder's equity as a
component of accumulated other comprehensive income.
(O) INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). Under the asset and liability method
of SFAS 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax laws
and tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities due to a change in tax rates is recognized
in income in the period that includes the enactment date. In addition, the
amounts of any future tax benefits are reduced by a valuation allowance to the
extent such benefits are not expected to be realized on a more likely than not
basis.
(P) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Some of the areas where
estimation is significant are as follows: (a) DNP is the estimated revenue
associated with shipments delivered or services completed and not invoiced;
(b) PTE is the associated purchased transportation expense that is estimated
corresponding to the DNP revenue; (c) accounts and notes receivable reserves for
doubtful accounts are estimated based on historical write-off data to establish
the uncollectible portion of the receivables; (d) costs relating to cargo damage
and delay claims are estimated based on actuarial methods; and (e) the Company's
insurance subsidiaries utilize third party actuaries to estimate insurance
reserves.
(Q) ACCOUNTING CHANGE
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended, ("SFAS 133"), which resulted in a change in method of
accounting. The cumulative effect of this accounting change was a
F-25
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
loss of $547 ($328, net of tax). SFAS 133 established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires recognition
of all derivatives as either assets or liabilities on the balance sheet and the
measurement of those instruments at fair value. Changes in the fair value of
derivatives will be recorded in each period in earnings or accumulated other
comprehensive income ("OCI"), depending upon whether a derivative is designated
and is effective as part of a hedge transaction and, if it is, the type of hedge
transaction. If the derivative is designated and is effective as a cash flow
hedge, the effective portions of the changes in the fair value of the derivative
are recorded in OCI and are recognized in the statement of operations when the
hedged item affects earnings. Ineffective portions are recognized in earnings.
(R) RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142") that supersede Accounting Principles Board
(APB) Opinion No. 16, "Business Combinations", and APB Opinion No. 17,
"Intangible Assets". The two statements modify the method of accounting for
business combinations and address the accounting and reporting for goodwill and
intangible assets. SFAS 141 is effective for all business combinations initiated
after June 30, 2001 and all business combinations accounted for by the purchase
method for which the date of acquisition is after June 30, 2001. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. The adoption of
SFAS 141 did not have a material effect on the Company's operating results or
financial condition. See Note 5 for the adoption of SFAS 142.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), superseding SFAS 121, effective for fiscal years beginning after
December 15, 2001. The provisions of SFAS 144 are for long-lived assets to be
disposed of by sale or otherwise are effective for disposal activities initiated
by an entity's commitment to a plan after the initial date of adoption of
SFAS 144. The Company is currently assessing the impact of SFAS 144 on its
operating results and financial condition.
(S) RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated financial
statements for the prior periods presented to conform with the December 31, 2001
presentation.
(T) YEAR-END
The Company changed its year-end effective 2000 to December 31. Prior to
2000, the fiscal year ended on the Saturday nearest to December 31 each year.
(2) ALLIED ACQUISITION AND ARBITRATION SETTLEMENT
On November 19, 1999, the Company completed the Allied Acquisition from Exel
plc, formerly NFC plc ("Seller"), for $450,000 (subject to purchase price
adjustment). The Allied Acquisition was funded through borrowings under new
credit facilities of $390,000, proceeds from the issuance of $150,000 of
F-26
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(2) ALLIED ACQUISITION AND ARBITRATION SETTLEMENT (CONTINUED)
Company senior subordinated notes and a capital contribution of $123,950 from
Allied Worldwide consisting of cash of $73,950 and $50,000 (non-cash) of
ownership in Allied Worldwide. The terms of the acquisition provided for an
adjustment to the purchase price pertaining to the amount of net controllable
assets acquired as of the date of the Allied Acquisition as determined by the
Company and Seller. The Company and Seller were unable to negotiate the final
amount of net controllable assets acquired, therefore, per the terms of the
acquisition agreement, a third party arbitrator was engaged for resolution of
that amount.
On September 12, 2001, the third party arbitrator rendered a binding
determination to the Company and Seller. The arbitrator increased the net
controllable assets and purchase price as estimated in the acquisition agreement
by $18,087. Interest expense on the purchase price adjustment of $3,250 was paid
for the period from the acquisition date to the date when the Company made
payment. The acquisition agreement also contained indemnifications by the Seller
for certain tax payments made by the Company on behalf of the Seller. These tax
payments plus associated interest totaled $3,980 and were netted against the
purchase price adjustment. Cash payment by the Company to the Seller on
October 19, 2001, for the net purchase price adjustment totaled $17,357. The
purchase price adjustment resulted in an adjustment to goodwill of $18,087.
(3) INVESTMENTS
Investments consisted primarily of debt and equity securities held by the
Company's insurance subsidiaries. These marketable investment securities
included:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
---------------------------------------------- ----------------------------------------------
UNREALIZED UNREALIZED UNREALIZED UNREALIZED
FAIR AMORTIZED HOLDING HOLDING FAIR AMORTIZED HOLDING HOLDING
VALUE COST GAINS LOSSES VALUE COST GAINS LOSSES
-------- --------- ---------- ---------- -------- --------- ---------- ----------
Current
Available-for-sale..... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Held-to-maturity....... 5,984 5,984 -- -- 3,375 3,378 -- (3)
------- ------- ------ ------- ------- ------- ------ -------
Total current............ $ 5,984 $ 5,984 $ -- $ -- $ 3,375 $ 3,378 $ -- $ (3)
======= ======= ====== ======= ======= ======= ====== =======
Noncurrent
Available-for-sale..... $56,122 $55,065 $2,256 $(1,199) $52,351 $51,580 $1,796 $(1,025)
Held-to-maturity....... 4,391 4,144 247 -- 3,724 3,557 167 --
------- ------- ------ ------- ------- ------- ------ -------
Total noncurrent......... $60,513 $59,209 $2,503 $(1,199) $56,075 $55,137 $1,963 $(1,025)
======= ======= ====== ======= ======= ======= ====== =======
</Table>
F-27
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(3) INVESTMENTS (CONTINUED)
The Company holds investments in certain debt securities with the following
aggregate maturities as of December 31, 2001:
<Table>
<Caption>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
YEAR COST FAIR VALUE
- ---- ---------------- ------------------
2002................................................... $ 5,984 $ 100
2003-2007.............................................. 4,144 9,220
2008-2012.............................................. -- 7,404
Thereafter............................................. -- 28,224
------- -------
$10,128 $44,948
======= =======
</Table>
Marketable securities are exposed to various risks and rewards, such as
interest rate, market and credit risk. Due to these risks and rewards associated
with marketable securities, it is possible that changes in the values of
marketable securities may occur and that such changes could affect the amounts
reported on the balance sheet.
Investments included noncurrent investments in joint ventures of $1 and $208
at December 31, 2001 and 2000, respectively.
(4) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Land................................................ $ 2,385 $ 2,517
Buildings and improvements.......................... 40,289 45,704
Transportation equipment............................ 91,538 79,000
Warehouse equipment................................. 50,431 38,200
Computer equipment and software..................... 62,563 46,127
Internally developed software in progress........... 25,230 20,045
Other............................................... 7,627 7,809
-------- --------
280,063 239,402
Less accumulated depreciation....................... 114,696 80,751
-------- --------
$165,367 $158,651
======== ========
</Table>
F-28
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(5) GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets included the following:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Trade names......................................... $178,100 $178,100
Goodwill............................................ 261,637 247,959
Accumulated amortization............................ (26,508) (15,802)
-------- --------
$413,229 $410,257
======== ========
</Table>
SFAS 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but rather, be tested for impairment at least
annually. The Company adopted the provisions of SFAS 142 effective January 1,
2002 and has discontinued the amortization of goodwill and intangible assets
with indefinite useful lives. The carrying amount of goodwill attributable to
each reportable business segment was as follows:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
------------------ ------------------
Van Line Network.................................... $118,459 $116,363
Logistics Services.................................. 13,604 10,599
Moving and Storage Services......................... 115,496 113,173
-------- --------
$247,559 $240,135
======== ========
</Table>
Trade names consist of the brand names northAmerican, Allied, Pickfords and
Allied Pickfords. These intangible assets have been identified as having
indefinite useful lives and were tested for impairment consistent with the
provisions of SFAS 142. The Company completed such testing and determined that
there was no impairment of intangible assets.
The following represents a comparison of results for the years ended
December 31, 2001 and 2000 and December 25, 1999, adjusted to exclude
amortization expense:
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
------------------ ------------------ ------------------
Net income (loss), as reported............... $ (10,947) $ (17,079) $ (19,934)
Amortization of goodwill and trade names..... 10,906 10,948 3,126
Income tax provision......................... (4,362) (4,379) (1,250)
--------- --------- ---------
Adjusted net income (loss)................... $ (4,403) $ (10,510) $ (18,058)
========= ========= =========
</Table>
F-29
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(6) OTHER ASSETS
Other assets consisted of the following:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Deferred debt issuance costs, net................... $15,361 $17,858
Prepaid pension..................................... 8,477 8,465
Cash surrender value of life insurance.............. 4,781 4,576
Deposits............................................ 1,634 1,551
Receivable from Allied Worldwide, Inc............... 23,268 18,567
Other............................................... 1,043 157
------- -------
$54,564 $51,174
======= =======
</Table>
(7) OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Accrued sales and fuel taxes........................ $11,542 $ 7,325
Accrued interest.................................... 3,516 6,590
Accrued customer discounts.......................... 7,546 7,874
Accrued restructuring expense....................... 2,237 1,961
Interest swap agreement liability................... 3,959 --
Escheat liability................................... 2,199 1,378
Accrued agent incentives............................ 2,852 3,980
Accrued other....................................... 21,003 28,668
------- -------
$54,854 $57,776
======= =======
</Table>
(8) INCOME TAXES
(A) PROVISION (BENEFIT) FOR INCOME TAXES
The Company and its wholly owned domestic subsidiaries file a consolidated
federal income tax return along with its parent company, with the exception of
Moveline (see Note 21). Moveline filed a separate consolidated return for 2000
and expects to file a separate consolidated return in 2001.
The components of loss before income taxes, extraordinary item and
cumulative effect of accounting change are:
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
----------------- ----------------- -----------------
U.S. operations...................... $(33,511) $(31,896) $(22,364)
Foreign operations................... 24,761 14,808 (630)
-------- -------- --------
$ (8,750) $(17,088) $(22,994)
======== ======== ========
</Table>
F-30
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(8) INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes includes:
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31,2001 DECEMBER 31, 2000 DECEMBER 25, 1999
---------------- ----------------- -----------------
Current:
Federal............................ $(3,425) $1,332 $(4,579)
Foreign............................ 6,225 3,596 1,482
State.............................. 938 669 (414)
------- ------ -------
Total current taxes.................. 3,738 5,597 (3,511)
Deferred:
Federal............................ (1,380) (5,518) (2,094)
Foreign............................ 2,613 847 (376)
State.............................. (3,102) (935) (466)
------- ------ -------
Total deferred taxes................. (1,869) (5,606) (2,936)
------- ------ -------
Provision (benefit) for income
taxes.............................. $ 1,869 $ (9) $(6,447)
======= ====== =======
</Table>
(B) RECONCILIATION OF STATUTORY RATE TO EFFECTIVE RATE
Total income taxes as reflected in the Consolidated Statements of Operations
differ from the amounts computed by applying the statutory federal corporate tax
rate as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
----------------- ----------------- -----------------
Federal income tax at statutory
rate............................... $(3,063) $(5,981) $(8,048)
State income taxes, net of federal
tax benefit........................ (1,407) (173) (572)
Foreign income taxes................. 3,066 3,747 479
Intangibles amortization............. 2,161 2,102 1,205
Other--net........................... 1,112 296 489
------- ------- -------
Provision (benefit) for income
taxes.............................. $ 1,869 $ (9) $(6,447)
======= ======= =======
</Table>
F-31
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(8) INCOME TAXES (CONTINUED)
(C) DEFERRED TAX ASSETS AND LIABILITIES
Deferred taxes related to the following:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Deferred tax assets:
Property and equipment............................ $ 1,089 $ 2,919
Reserves, including casualty and other claims..... 32,640 35,474
Employee benefits................................. 7,239 8,555
Taxes other than income taxes..................... 2,039 2,034
Postretirement benefits other than pensions....... 9,417 8,429
Net operating loss carryforwards.................. 19,684 3,247
Pension obligation................................ 4,432 --
Unrealized gains and other........................ 7,337 8,396
-------- --------
Total gross deferred tax assets..................... 83,877 69,054
Less valuation allowance............................ (211) (120)
-------- --------
Net deferred tax asset.............................. 83,666 68,934
-------- --------
Deferred tax liabilities:
Foreign earnings.................................. 5,048 2,741
Property and equipment............................ 4,291 1,346
State income taxes................................ 2,196 683
Intangibles....................................... 64,794 63,915
-------- --------
Total gross deferred tax liabilities................ 76,329 68,685
-------- --------
Net deferred tax assets............................. 7,337 249
Less net current deferred tax assets................ 37,051 38,719
-------- --------
Net long-term deferred tax liability................ $(29,714) $(38,470)
======== ========
</Table>
At December 31, 2001 and December 31, 2000, a valuation allowance has been
established due to the uncertainty of realization of foreign net operating loss
("NOL") carryforwards. The net change in the total valuation allowance for the
period ended December 31, 2001 was an increase of $91. The increase was the
result of additional losses generated in jurisdictions where realization is
uncertain. The domestic NOL carryforwards expire between the years
2019 - 2021. Management believes it is more likely than not all other deferred
tax assets will be realized based on the Company's anticipated future taxable
earnings or available tax planning alternatives.
(D) TAXING AUTHORITY REVIEWS
Consolidated federal income tax returns of NS have been examined and Revenue
Agent Reports have been received for all years up to and including 1996. NS will
indemnify the Company for any tax liabilities prior to the 1998 Acquisition to
the extent they were not accrued at the purchase date. Exel plc will indemnify
the Company for any Allied Acquisition companies' tax liabilities related to
periods prior to the Allied Acquisition.
F-32
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(9) REVOLVING CREDIT FACILITY
In connection with the Allied Acquisition, the Company entered into a credit
agreement (the "Credit Agreement") on November 19, 1999 that replaced a former
credit agreement. The Credit Agreement consists of a revolving credit facility
(the "Revolving Credit Facility") and two term loans. See Note 10 for discussion
of the term loans and the extraordinary loss related to the early extinguishment
of the former credit agreement.
Under the Revolving Credit Facility, as amended and restated, the Company
may borrow up to $150,000, which includes a $10,000 swing line subfacility and a
$50,000 letter of credit subfacility, until its scheduled maturity on
November 18, 2006. Advances must be made in increments of no less than $5,000 or
multiples of $1,000 in excess thereof. If lesser amounts are required, then the
swing line subfacility may be activated. Borrowing under the Revolving Credit
Facility was $46,000 and $83,400 at December 31, 2001 and 2000, respectively. A
commitment fee of 0.5% is charged on the unused portion of the Revolving Credit
Facility and is payable quarterly. The Company had outstanding letters of credit
of $15,819 and $13,673 at December 31, 2001 and 2000, respectively, primarily in
conjunction with its insurance agreements. The Company has available credit of
$88,181 and $52,927 at December 31, 2001 and 2000, respectively.
Interest is payable at ABR rates (based on prime, base CD or federal funds
effective rates), plus a margin of 2.0% (effective rate of 6.75% as of
December 31, 2001) or the London Interbank Offered Rate (LIBOR), plus a margin
of 3.0% (effective rate of 5.14% as of December 31, 2001). The weighted average
interest rates for the years ended December 31, 2001 and 2000 were 7.29% and
9.48%, respectively. The rate selected is determined by the facility/subfacility
from which the borrowings are drawn, the maturity date of the loan and the
required notice of the borrowing. ABR interest is payable at the end of each
quarter and LIBOR interest is payable in arrears on the last day of the loan
period for loans less than three months and at the end of each quarter for loans
greater than three months. Principal is repaid as funds are available.
Certain wholly-owned foreign subsidiaries maintain operating lines of credit
totaling $14,299. Interest is payable monthly or quarterly at the bank's base or
prime rate (currently 4.0%--6.7%) plus 0.25%--1.0%, and include commitment fees
ranging from 0%--0.30% on the unused portion of the line. As of December 31,
2001 and 2000, the outstanding balance was $1,235 and $1,861, respectively.
These agreements are guaranteed by the Company.
See Note 10 regarding covenants relating to the Credit Agreement.
F-33
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(10) LONG-TERM DEBT
In connection with the closing of the Allied Acquisition, the Company
entered into debt agreements to refinance existing indebtedness and to finance a
portion of the Allied Acquisition. Long-term debt consisted of:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Note payable--Tranche A............................. $135,000 $145,050
Note payable--Tranche B............................. 171,500 173,250
Senior Subordinated Notes........................... 150,000 150,000
Other............................................... 868 221
-------- --------
Total debt.......................................... 457,368 468,521
Less current maturities............................. 16,958 11,800
-------- --------
Total long-term debt................................ $440,410 $456,721
======== ========
</Table>
(A) NOTES PAYABLE--TRANCHE A AND TRANCHE B
As part of the financing of the Allied Acquisition, the Company replaced a
former credit agreement with the Credit Agreement, which includes two term
loans, as amended and restated, amounting to $150,000 (Note payable--Tranche
A) and $175,000 (Note payable--Tranche B), respectively. Notes payable Tranche A
and Tranche B are senior notes, collateralized by substantially all the assets
of the Company, payable in consecutive quarterly interest and principal
installments, commencing on March 24, 2000, through maturity of November 18,
2006 and November 18, 2007, respectively.
Interest is payable at ABR or LIBOR, plus an applicable margin, which
corresponds to the achievement of certain performance criteria determined from
the financial statements. At December 31, 2001 and 2000, respectively, Tranche A
interest was accruing at LIBOR, plus 3%, (5.10% and 9.78%) and Tranche B
interest was accruing at LIBOR, plus 4%, (6.10% and 10.78%).
The Credit Agreement, as amended and restated, governing Tranche A, Tranche
B and the Revolving Credit Facility contains a number of covenants that limit,
among other things, the incurrence of additional indebtedness, the incurrence of
capital lease obligations and purchase of operating property. The Credit
Agreement also requires the Company to maintain certain financial tests,
including a consolidated interest coverage ratio and a leverage ratio, and
includes a general lien on certain of the Company's assets. The agreement also
includes certain cross default provisions such that a default under any other
loan agreements by the Company or its Parent would cause a default in the Credit
Agreement. The Company is in compliance with all financial convenants.
In connection with the extinguishment of the former credit agreement, the
Company recognized an extraordinary loss (non-cash) of $3,387 ($5,519 before
applicable tax benefit) in 1999 for the write-off of associated unamortized
deferred debt issuance costs.
(B) SENIOR SUBORDINATED NOTES
Also in connection with the Allied Acquisition, the Company issued $150,000
aggregate principal amount of 13.375% Senior Subordinated Notes ("Senior
Subordinated Notes") due December 1, 2009.
F-34
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(10) LONG-TERM DEBT (CONTINUED)
Each note bears interest at a rate of 13.375% per annum and is payable in
semi-annual installments on June 1 and December 1 each year to holders of record
at the close of business on the May 15 or November 15 immediately preceding the
interest payment date. During 2001 and 2000, in accordance with the registration
rights agreement, additional maximum interest of 0.50% per annum began accruing
on the Senior Subordinated Notes, as a registered exchange offer for such notes
has not yet been consummated. Such registration is expected to commence in 2002.
The Senior Subordinated Notes are unsecured senior subordinated indebtedness
of the Company. They are subordinated in right of payment, as set forth in the
Senior Subordinated Notes Indenture ("Indenture"), to the payment when due in
full cash of all existing and future senior indebtedness of the Company. These
Senior Subordinated Notes have been guaranteed by certain domestic subsidiaries
of the Company.
The indenture and the agreements governing this debt contain a number of
similar less restrictive covenants as those included in the Credit Agreement
described above. In 1999, the Company issued these notes in a Rule 144A private
placement under the Securities Act.
(C) TRANSFERS AND SERVICING OF FINANCIAL ASSETS
During 2001, the Company sold a portion of its equipment notes receivable
portfolio to an unaffiliated third party. The transaction, which qualified as a
sale under Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
resulted in cash proceeds of $6,317, which approximated the fair value of notes
receivables sold. The equipment notes receivable are due from agents or
owner-operators for trailers, tractors and straight trucks and are
collateralized by those assets. Each note is generally for a term of five years,
bearing interest at either a fixed or variable rate of prime plus 1.0%--2.0%.
Principal and interest are payable monthly over the term of the agreement. Under
the terms of the sales agreement, the Company is responsible for servicing,
administering, and collecting these notes receivable on behalf of the
unaffiliated third party. Servicing fees under the sales agreement are deemed
adequate compensation to the Company for performing the servicing, accordingly
no servicing asset or liability has been recognized in the accompanying
financial statements. Under the terms of the transaction, the maximum recourse
exposure to the Company was $748.
Future maturities of long-term debt are as follows:
<Table>
<Caption>
DECEMBER 31, 2001
-----------------
2002........................................................ $ 16,958
2003........................................................ 21,925
2004........................................................ 21,910
2005........................................................ 36,700
2006........................................................ 109,650
Thereafter.................................................. 250,225
--------
$457,368
========
</Table>
F-35
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(10) LONG-TERM DEBT (CONTINUED)
The fair value of the Company's long-term debt approximates the carrying
amount based on the present value of cash flows discounted at the current rates
offered to the Company on similar debt instruments.
(11) CAPITAL AND OPERATING LEASES
During 2001, the Company entered into two trailer lease agreements
(non-cash) totaling $3,833 and a tractor satellite-communication equipment lease
agreement in the amount of $563. Each of these leases is being accounted for as
a capital lease and requires the company to pay customary operating and repair
expenses that will keep these assets in operating condition. The trailer leases
contain purchase options at amounts approximating fair market value at lease
termination in 2008. The tractor satellite-communication equipment lease
contains a bargain purchase option of $1 at lease termination in 2006.
Also, during 2001, the MSS-UK operating segment entered into two vehicle
lease agreements totaling $9,870 (non-cash). Both of the leases are being
accounted for as capital leases and require the company to pay customary
operating and repair expenses that will keep the assets in roadworthy condition
through the termination dates of 2008 and 2010. The vehicle leases do not
contain purchase options, however, the MSS-UK operating segment has the right to
share in any profits made from the sale of the assets by the financing company
after the lease termination date.
During 2000, the Company sold trailers for $12,716 having a net book value
of $7,343. The assets were leased back from the purchaser over a period of
between three and six years depending on the age of the individual assets. The
resulting lease is being accounted for as a capital lease and the resulting
deferred gain of $5,373 is being amortized over the life of the lease. The lease
requires the Company to pay customary operating and repair expenses that will
keep these assets in roadworthy condition. The lease contains purchase options
at amounts approximating fair market value in 2003, 2004 and at lease
termination.
The Company has noncancelable lease commitments under operating leases for
rental of office space, warehouse facilities and office equipment. The Company's
rental expense under these operating leases was $52,438, $35,693 and $20,081 for
the years ended December 31, 2001 and 2000 and December 25, 1999, respectively.
F-36
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(11) CAPITAL AND OPERATING LEASES (CONTINUED)
Future minimum rental payments under capital lease obligations and operating
leases at December 31, 2001 are as follows:
<Table>
<Caption>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
2002........................................................ $ 5,144 $ 49,411
2003........................................................ 3,797 39,982
2004........................................................ 3,136 29,795
2005........................................................ 3,057 26,357
2006........................................................ 5,014 18,415
Thereafter.................................................. 4,045 69,001
------- --------
Total minimum lease payments................................ 24,193 $232,961
------- ========
Less interest............................................... 3,821
=======
Present value of net minimum lease payments................. 20,372
=======
Less current portion........................................ 4,006
=======
Long-term portion of capital lease obligation............... $16,366
=======
</Table>
Assets under capital leases consist of the following:
<Table>
<Caption>
DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
Transportation equipment.................................... $27,361 $13,430
Less accumulated depreciation............................... 6,434 3,054
------- -------
$20,927 $10,376
======= =======
</Table>
F-37
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(12) RETIREMENT AND POSTRETIREMENT MEDICAL PLANS
DEFINED BENEFIT PLANS
The Company has several defined pension plans covering substantially all of
its domestic employees and certain employees in other countries. Pension
benefits earned are generally based on years of service and compensation during
active employment, however, the level of benefits and terms of vesting may vary
among plans. Pension plan assets are administered by trustees and are
principally invested in equity securities, fixed income securities, and pooled
separate accounts. The funding of pension plans is determined in accordance with
statutory funding requirements.
The Company also has an Excess Benefit Plan and an Executive Retirement and
Savings Plan which are unfunded nonqualified plans that provide retirement
benefits not otherwise provided under the Qualified Plan because of the benefit
limitations imposed by Section 415 and 401(a)(17) of the Internal Revenue Code.
These Plans ensure that an executive receives the total pension benefit to which
he/she otherwise would be entitled, were it not for such limitations. The
expense associated with the Excess Benefit Plan is included within the Pension
Benefits table below. For the years ended December 31, 2001 and 2000 and the
period November 19, 1999 through December 31, 1999, the expense and (income)
associated with the Executive Retirement and Savings Plan was $496, $250 and
$(556), respectively.
In addition, the Overlap Benefit Plan for various domestic employees, an
unfunded, nonqualified retirement plan, provides retirement benefits forfeited
by the highly compensated employees under the Qualified Plan because of the
changes to the retirement plan formula which were effective April 18, 1989.
Eligible employees of Allied Pickfords, the Company's United Kingdom
subsidiary, continued to be eligible for a defined benefit plan of the Seller
through April 5, 2000. At the time of the Allied Acquisition, the Company
provided each participant with the opportunity to join its defined benefit plan.
Substantially all the eligible participants elected to join. The Company has
recognized net periodic pension costs associated with the plan since the
participant election date of April 5, 2000. On September 19, 2001, the benefit
obligation and plan assets related to prior service costs for this plan were
determined by an independent actuary and transferred from the Seller. In
conjunction herewith, the loss in fair value in plan assets from the Allied
Acquisition date to September 19, 2001 has been reflected as a reduction in plan
asset value prior to the transfer of $19,322. The Company has recorded a prepaid
pension asset of approximately $8,103.
F-38
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(12) RETIREMENT AND POSTRETIREMENT MEDICAL PLANS (CONTINUED)
Information on the Company's domestic and foreign defined benefit plans and
amounts recognized in the Company's consolidated balance sheets, based on
actuarial valuation, are as follows:
<Table>
<Caption>
COMBINED PLANS
EXCLUDING UNITED KINGDOM UNITED KINGDOM
------------------------------------- -----------------
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 31, 2001
----------------- ----------------- -----------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of period.... $ 89,247 $80,326 $54,515
Service cost................................. 2,926 3,240 3,136
Interest cost................................ 6,657 6,294 3,179
Plan participants' contribution.............. -- -- 1,601
Actuarial (gain)/loss........................ 3,428 5,054 (8,155)
Special termination benefits................. -- 1,438 --
Benefits paid.............................. (5,147) (6,978) (582)
Currency translation......................... (214) (127) (1,401)
-------- ------- -------
Benefit obligation at end of period.......... $ 96,897 $89,247 $52,293
-------- ------- -------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of
period..................................... $ 88,788 $93,034 $74,830
Reduction in plan asset value prior to
transfer................................... -- -- (19,322)
Actual return on plan assets................. (3,444) 632 7,941
Employer contribution........................ 124 2,035 --
Plan participants' contribution.............. -- -- 1,601
Benefits paid................................ (5,064) (6,913) (582)
Currency translation......................... -- -- (1,924)
-------- ------- -------
Fair value of plan assets at end of period... $ 80,404 $88,788 $62,544
-------- ------- -------
FUNDED STATUS RECONCILIATION
Funded status................................ $(16,493) $ (459) $10,251
Unrecognized net actuarial (gain)/loss....... 21,195 6,615 (2,148)
-------- ------- -------
Prepaid (accrued) benefit cost............... $ 4,702 $ 6,156 $ 8,103
======== ======= =======
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEET
Prepaid benefit cost......................... $ -- $ 8,280 --
Cost transferred from seller................. -- -- 8,368
Accrued benefit liability.................... (9,416) (2,682) --
Intangible asset............................. 41 -- --
Accumulated other comprehensive income....... 14,077 558 --
Net change in prepaid benefit
(September 19-December 31)................. -- -- (265)
-------- ------- -------
Net amount recognized........................ $ 4,702 $ 6,156 $ 8,103
======== ======= =======
</Table>
F-39
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(12) RETIREMENT AND POSTRETIREMENT MEDICAL PLANS (CONTINUED)
The following actuarial assumptions were used for the Company's pension
plans:
<Table>
<Caption>
COMBINED PLANS
EXCLUDING UNITED KINGDOM UNITED KINGDOM
------------------------------------------ --------------
DECEMBER 31, DECEMBER 31, DECEMBER 25, DECEMBER 31,
2001 2000 1999 2001
------------ ------------ ------------ --------------
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate............................. 7.00-7.25% 7.00-7.50% 7.00-7.75% 5.75%
Expected return on plan assets............ 9.00% 9.00% 9.00% 7.75%
Rate of compensation increase............. 2.00-5.00% 2.00-5.00% 2.00-5.00% 4.00%
</Table>
Information on the Company's significant domestic and foreign defined
benefit plans and amounts recognized in the Company's consolidated statements of
operations, based on actuarial valuation are as follows:
<Table>
<Caption>
COMBINED PLANS
EXCLUDING UNITED KINGDOM UNITED KINGDOM
------------------------------------------ --------------
DECEMBER 31, DECEMBER 31, DECEMBER 25, DECEMBER 31,
2001 2000 1999 2001
------------ ------------ ------------ --------------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost.............................. $ 2,926 $ 3,240 $ 3,087 $ 3,136
Interest cost............................. 6,657 6,294 3,796 3,179
Expected return on plan assets............ (7,837) (8,560) (4,841) (5,710)
Amortization of recognized actuarial
(gain)/loss............................. 135 (28) 16 68
------- ------- ------- -------
Net periodic benefit cost................. 1,881 946 2,058 673
Special termination benefits and
curtailment............................. -- 1,438 -- --
------- ------- ------- -------
Net periodic benefit cost after
curtailment and settlements............. $ 1,881 $ 2,384 $ 2,058 $ 673
======= ======= ======= =======
</Table>
The Company recognizes an accrued benefit liability in its financial
statements for its unfunded Excess Benefit Plan and Overlap Benefit Plan. The
accrued benefit cost at December 31, 2001 and 2000 included $1,012 and $1,107,
respectively, related to this liability.
The Company intends to fund at least the minimum amount required under the
Employee Retirement Income Security Act of 1974, as amended, for its plans. The
minimum funding amount at December 31, 2001 and 2000 is $14,118 and $558,
respectively. This amount is included in accrued benefit costs.
The Company's NAVL Canadian subsidiary, North American Van Lines
Canada Ltd., has a defined benefit plan with the benefits generally based upon
years of service and the highest five-year average salary during employment. As
of December 31, 2001 and 2000, the accumulated benefit obligation of accrued
pension benefits was $1,403 and $1,575, respectively, and the aggregate market
value of pension plan assets was $1,772 and $1,786, respectively. As of
December 31, 2001 and 2000, the prepaid pension cost was $190 and $185,
respectively. The (income) expense associated with the plan for the years ended
December 31, 2001 and 2000 and December 25, 1999 was $53, $(61) and $(36),
respectively.
F-40
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(12) RETIREMENT AND POSTRETIREMENT MEDICAL PLANS (CONTINUED)
POSTRETIREMENT MEDICAL PLANS
The Company has nonpension postretirement benefit plans for certain domestic
employees that provide specific health care and death benefits to eligible
retired employees. Under the present plans, which may be amended or terminated
at the Company's option, a defined percentage of health care expenses is
covered, after reductions for any deductibles, co-payments, Medicare payments
and, in some cases, coverage provided by other group insurance policies. The
cost of such health care coverage to a retiree may be determined in part by a
retiree's years of vested service with the Company prior to retirement. Death
benefits are based on a fixed amount at time of retirement.
<Table>
<Caption>
DECEMBER 31,2001 DECEMBER 31,2000
---------------- ----------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of period................... $ 15,611 $ 12,800
Service cost................................................ 1,158 892
Interest cost............................................... 1,293 949
Plan participants' contribution............................. 57 42
Actuarial loss.............................................. 2,051 94
Special termination benefits................................ -- 1,857
Curtailment gains........................................... -- (298)
Benefits paid............................................... (1,180) (846)
Other actuarial adjustment.................................. -- 121
-------- --------
Benefit obligation at end of period....................... $ 18,990 $ 15,611
======== ========
FUNDED STATUS RECONCILIATION AND AMOUNTS RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEETS
Funded status............................................... $(18,990) $(15,611)
Unrecognized net actuarial (gain)/loss...................... 847 (1,192)
-------- --------
Accrued benefit cost and net amount recognized.............. $(18,143) $(16,803)
======== ========
</Table>
The following actuarial assumptions were used for the Company's
postretirement plans:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
----------------- ----------------- -----------------
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate................................ 7.25% 7.50% 7.75%
Health care cost trend rates................. 8.50% 7.00% 7.50%
</Table>
F-41
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(12) RETIREMENT AND POSTRETIREMENT MEDICAL PLANS (CONTINUED)
The health care cost trend rate was assumed to decrease gradually to 4.5%
for 2010 and remain at that level thereafter.
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
----------------- ----------------- -----------------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost................................. $1,158 $ 892 $1,050
Interest cost................................ 1,293 949 880
Amortization of recognized actuarial
(gain)/loss................................ 12 (39) --
------ ------ ------
Net periodic benefit cost.................... 2,463 1,802 1,930
Special termination benefits and curtailment
gains...................................... -- 1,570 --
------ ------ ------
Net periodic benefit cost after curtailment
and settlements............................ $2,463 $3,372 $1,930
====== ====== ======
</Table>
The 2000 special termination benefits and curtailment gains were related to
benefit enhancements granted under certain programs for those employees who
ceased work during 2000.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rate would have the following effects:
<Table>
<Caption>
ONE-PERCENTAGE POINT
---------------------
INCREASE DECREASE
--------- ---------
Effect on total of service and interest cost components..... $ 478 $ (394)
Effect on postretirement benefit obligation................. $3,123 $(2,658)
</Table>
DEFINED CONTRIBUTION PLANS
In 1994, the Company's NAVL United Kingdom subsidiary, North American Van
Lines, Ltd., established a contributory defined contribution plan for eligible
employees. The plan is funded through contributions from employees, generally 3%
of earnings, which are matched by the Company. The expense associated with the
plan was $36, $47 and $59 for the years ended December 31, 2001 and 2000 and
December 25, 1999, respectively.
In addition, the Company maintains the NAVL Employees Savings Plan and Trust
and the Allied Van Lines, Inc. Profit-Sharing and Retirement Savings Plan for
eligible employees. Both plans qualify under Section 401(a) and 401(k) of the
Internal Revenue Code. The Company has made no contributions to the NAVL plan
since its inception. For the Allied plan, the Company makes matching
contributions based on participant contributions to the plan and also
contributes a profit-sharing contribution which is 4% of the eligible
compensation of each participant. The Company made contributions of $1,225,
$1,216 and $164 for the years ended December 31, 2001 and 2000 and the period
November 19, 1999 to December 31, 1999, respectively.
F-42
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(13) POSTEMPLOYMENT MEDICAL PLAN
The Company provides certain postemployment health care continuation
benefits to inactive NAVL employees and their dependents during the period
following employment but before retirement. As of December 31, 2001 and 2000,
the accumulated postemployment benefit obligation for such benefits was $2,012
and $1,663, respectively. The expense associated with the plan was $789, $196
and $357 for the years ended December 31, 2001 and 2000 and December 25, 1999,
respectively.
(14) INCENTIVE AND DEFERRED COMPENSATION
The Company maintains a Management Incentive Plan for certain executives and
key management employees. The plan is administered by the Board of Directors who
do not participate in the plan. Incentive compensation is based upon achievement
of certain predetermined corporate performance goals. The Company also maintains
a Performance Incentive Plan for eligible employees not included in the
Management Incentive Plan. The plan is administered by the Vice President Human
Resources, who does not participate in the plan. Incentive compensation is based
upon achievement of certain predetermined corporate performance goals. The
expense associated with the incentive plans was $147, $8,133 and $3,933 for the
years ended December 31, 2001 and 2000 and December 25, 1999, respectively.
(15) STOCK OPTION PLAN
The Company's parent maintains a stock option plan (the "Option Plan") for
officers and other key employees which provides for the granting of options to
acquire up to 300,000 shares of the parent's Common Stock. The administrator of
the Option Plan is Allied Worldwide's Board of Directors. Under the Option Plan,
Service Options and Performance Options have been granted with each share of
stock sold to the officers and other key employees. Service Options are vested
in equal annual installments on each of the first five anniversaries of the
grant date. Performance Options are vested dependant on achievement of
cumulative EBITDA targets, or if not vested sooner, become vested on the ninth
anniversary of the grant date. All options granted expire after ten years from
the grant date. The exercise price of the options equaled the fair market value
of common stock at the date of the grant. Fair market value was determined by
management to be equal to the price paid for common stock issued at the grant
date.
F-43
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(15) STOCK OPTION PLAN (CONTINUED)
Information with respect to the options granted under the Option Plan is as
follows:
<Table>
<Caption>
# OF WEIGHTED AVG.
SHARES EXERCISE PRICE
-------- --------------
Outstanding at December 26, 1998...................... 71,400 $100.00
-------- -------
Options granted..................................... 56,468 136.99
Options cancelled................................... (10,000) 100.00
-------- -------
Outstanding at December 25, 1999...................... 117,868 117.72
Options granted..................................... 32,560 142.00
Options cancelled................................... (59,050) 106.04
-------- -------
Outstanding at December 31, 2000...................... 91,378 133.92
Options granted..................................... 6,694 142.00
Options cancelled................................... (38,482) 136.46
-------- -------
Outstanding at December 31, 2001...................... 59,590 $133.19
======== =======
</Table>
The weighted average remaining contractual life of these options is
7.93 years. At December 31, 2001, the number of options that became exercisable
were 23,827. At December 31, 2000 and December 25, 1999, the number of options
that became exercisable were 9,553 and 10,398, respectively.
During the years ended December 31, 2001 and 2000, the fair value of common
stock was $142.00. During the year ended December 25, 1999, the fair value of
common stock ranged from $100.00 to $142.00.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Parent has elected to continue to account for stock-based compensation under the
intrinsic value based method of accounting described by Accounting Principles
Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under
APB 25, generally no cost is recorded for stock options issued to employees
unless the option price is below market at the time options are granted.
Had the parent elected to apply the provisions of SFAS 123 regarding
recognition of compensation expense to the extent of the calculated fair value
of stock options granted, the net loss would have been increased as follows:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 25, 1999
----------------- ----------------- -----------------
Net loss as reported......................... $(10,947) $(17,079) $(19,934)
Pro forma net loss........................... $(11,291) $(17,437) $(20,158)
</Table>
The fair value of each option is estimated on the date of grant, using the
Black-Scholes option pricing model with the following weighted average
assumptions used: risk-free interest rates of 4.59% for 2001, 5.00% to 6.66% for
2000 and 5.36% to 6.47% for 1999, expected volatility of 0.01%, expected life of
5 years for all years and no dividend payments.
F-44
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(16) COMMITMENTS AND CONTINGENCIES
(A) LITIGATION
The Company and certain subsidiaries are defendants in numerous lawsuits
relating principally to motor carrier operations. In the opinion of management,
after consulting with its legal counsel, the amount of the Company's ultimate
liability resulting from these matters should not materially affect the
Company's financial position, results of operations or liquidity.
(B) ENVIRONMENTAL MATTERS
The Company has been named as a potentially responsible party ("PRP") in two
environmental clean-up proceedings by federal and state authorities and one
additional environmental clean-up proceeding by a group of PRP's. The suits are
brought under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or other federal or state statutes. Based on
all known information, it is estimated that the settlement cost of each site
will not be significantly larger than the litigation reserves established, which
totaled $35 as of December 31, 2001 and 2000. It is possible that additional
claims or lawsuits involving unknown environmental matters or now unidentified
environmental sites may arise in the future.
The Company owns or has owned and leases or has leased facilities at which
underground storage tanks for diesel fuel are located and operated. Management
believes that the Company has taken the appropriate and necessary action with
regard to releases of diesel fuel that have occurred. As conditions may exist on
these properties related to environmental problems that are latent or
undisclosed, there can be no assurance that the Company will not incur
liabilities or costs, the amount of which cannot be estimated reliably at this
time. However, based on its assessment of the facts and circumstances now known
and after consulting with its legal counsel, management believes that it has
recorded appropriate estimates of liability for those environmental matters of
which the Company is aware. Further, management believes it is unlikely that any
identified matters, either individually or in aggregate, will have a material
effect on the Company's financial position, results of operations or liquidity.
(C) PURCHASE COMMITMENTS
The Company has entered into certain purchase commitments of $9,844 and
$23,471 for software licenses at December 31, 2001 and trailers and software
licenses at December 31, 2000, respectively.
(17) FINANCIAL INSTRUMENTS
The Company utilizes interest rate agreements and foreign exchange contracts
to manage interest rate and foreign currency exposures. The principal objective
of such contracts is to minimize the risks and/or costs associated with
financial and international operating activities. The Company does not utilize
financial instruments for trading purposes. The counterparties to these
contractual arrangements are financial institutions with which the Company also
has other financial relationships. The Company is exposed to credit loss in the
event of nonperformance by these counterparties. However, the Company does not
anticipate nonperformance by the other parties, and no material loss would be
expected from their nonperformance.
F-45
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(17) FINANCIAL INSTRUMENTS (CONTINUED)
(A) INTEREST RATE INSTRUMENTS
The company enters into interest swap agreements to manage its exposure to
changes in interest rates. The swaps involve the exchange of variable interest
rate payments for fixed interest rate payments without exchanging the notional
principal amounts. The Company records the payments or receipts on the
agreements as adjustments to interest expense. Interest rate swap agreements are
accounted for as cash flow hedges.
Derivative gains or losses included in OCI are reclassified into earnings at
the time when the hedged item affects earnings. During the year ended
December 31, 2001, $1,900 was reclassified as interest expense. During the year
ended December 31, 2001, $82 of expense was recognized in earnings for
ineffectiveness relating to cash flow hedges. The Company estimates that net
derivative losses of $3,482 included in accumulated other comprehensive income
at December 31, 2001 will be reclassified into earnings during the next twelve
months. The following is a recap of each agreement:
<Table>
Notional amount....... $40,000 $20,000 $70,000 $20,000
Fixed rate paid....... 4.91% 5.35% 5.44% 4.785%
Variable rate 3 month LIBOR 1 month LIBOR 1 month LIBOR 1 month LIBOR
received............
Expiration date....... March 2003 January 2002 December 2002 April 2003
</Table>
(B) FOREIGN EXCHANGE INSTRUMENTS
From time-to-time, the Company utilizes foreign currency forward contracts
in the regular course of business to manage its exposure against foreign
currency fluctuations. The forward contracts establish the exchange rates at
which the Company will purchase or sell the contracted amount of U.S. Dollars
for specified foreign currencies at a future date. The Company utilizes forward
contracts which are short-term in duration (less than one year). The major
currency exposures hedged by the Company are the Australian dollar, British
pound, German mark and Euro. The contract amount of foreign currency forwards
was $3,523 and $1,870 at December 31, 2001 and 2000, respectively. Changes in
fair value relating to these derivatives are recognized in current period
earnings. Approximately $432 of gains resulting from changes in fair value of
these derivatives was recognized in earnings for the year ended December 31,
2001.
(C) CONVERTIBLE BOND INSTRUMENTS
The Company holds various debt securities with convertible features in the
available-for-sale investment portfolio of its insurance operations. The value
of the conversion feature is bifurcated from the value of the underlying bond.
Changes in fair value are recorded in current period earnings. During the year
ended December 31, 2001, $9 of gains from increases in the fair market value of
these instruments was recorded in earnings.
(18) OPERATING SEGMENTS
The Company has three reportable segments--Van Line Network, Logistics
Services, and Moving and Storage Services. Intersegment transactions,
principally relating to international relocations, are recorded at market rates
as determined by management. The consolidation process results in the
appropriate
F-46
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(18) OPERATING SEGMENTS (CONTINUED)
elimination of intercompany transactions, with revenues reflected in the segment
responsible for billing the end customer.
The Van Line Network segment provides domestic and international residential
relocation services, operating as North American Van Lines, Allied Van Lines and
Global Van Lines, through a network of exclusive agents. It is comprised of the
Relocation Services Division, which provides packing, loading, transportation,
delivery and warehousing services for any type of household move in the U.S. and
Canada, and the International Division, which provides or coordinates these same
services for customers on a global basis. The Van Line Network segment also
includes a multiple-line property and casualty insurance company.
The Logistics Services segment is comprised of the Specialized
Transportation unit, which provides transportation and related services to
principally electronics, medical equipment and other suppliers of sensitive
goods requiring specialized handling in the U.S.; the Solutions unit which
provides customized solutions and programs to facilitate the handling of
high-value products; and the Europe unit, which provides these same logistics
services in the United Kingdom and mainland Europe.
The Moving and Storage Services segment, operating principally as Pickfords
or Allied Pickfords, operates in the United Kingdom, portions of Europe,
Australia, New Zealand and other Asia/ Pacific locations and provides complete
domestic and international relocation services. Moving and Storage Services also
provides a full range of office and industrial relocation services including
records management in most of the aforementioned locations.
The tables below represent information about revenues, depreciation and
amortization, income (loss) from operations and total assets by segment used by
the chief decision-makers of the Company as of and for the years ended
December 31, 2001 and 2000 and December 25, 1999:
<Table>
<Caption>
DEPRECIATION
AND INCOME (LOSS)
DECEMBER 31, 2001: REVENUES AMORTIZATION(1)(2) FROM OPERATIONS TOTAL ASSETS(3)
- ------------------ ---------- ------------------ --------------- ---------------
Van Line Network.............. $1,386,922 $18,434 $31,282 $ 441,296
Logistics Services............ 531,973 10,997 (2,509) 186,046
Moving and Storage Services... 330,408 19,311 24,529 416,634
Corporate..................... -- -- -- 51,838
---------- ------- ------- ----------
Consolidated Totals........... $2,249,303 $48,742 $53,302 $1,095,814
========== ======= ======= ==========
</Table>
<Table>
<Caption>
DEPRECIATION AND INCOME FROM
DECEMBER 31, 2000: REVENUES AMORTIZATION(1)(2) OPERATIONS TOTAL ASSETS(3)
- ------------------ ---------- ------------------ ------------ ---------------
Van Line Network.............. $1,478,733 $20,484 $23,070 $ 518,211
Logistics Services............ 576,574 12,117 4,857 203,046
Moving and Storage Services... 323,387 21,279 21,918 402,753
Corporate..................... -- -- -- 92,592
---------- ------- ------- ----------
Consolidated Totals........... $2,378,694 $53,880 $49,845 $1,216,602
========== ======= ======= ==========
</Table>
F-47
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(18) OPERATING SEGMENTS (CONTINUED)
<Table>
<Caption>
DEPRECIATION AND INCOME (LOSS)
DECEMBER 25, 1999: REVENUES AMORTIZATION(1)(2) FROM OPERATIONS
- ------------------ ---------- ------------------ ---------------
Van Line Network................... $ 593,234 $11,322 $ 1,490
Logistics Services(4).............. 529,661 18,097 (3,616)
Moving and Storage Services........ 36,892 1,790 1,009
Corporate.......................... -- -- --
---------- ------- -------
Consolidated Totals................ $1,159,787 $31,209 $(1,117)
========== ======= =======
</Table>
- ------------------------
(1) Depreciation expense for capital expenditures in the corporate category is
allocated to the segments in order to determine segment income from
operations.
(2) Depreciation and amortization are comprised of depreciation, goodwill and
amortization and deferred agent contract amortization.
(3) Total assets by segment are specific assets such as trade receivables and
property and equipment. Assets included in the corporate category include
non-allocated assets such as the corporate headquarters building, computer
hardware and software, contracts receivable associated with equipment sales,
deferred taxes and goodwill.
(4) Income (loss) from operations includes $5,000 of customer contract
termination costs.
Specified items related to segment assets:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
CAPITAL EXPENDITURES CAPITAL EXPENDITURES
-------------------- --------------------
Van Line Network................................. $11,000 $17,345
Logistics Services............................... 14,553 12,443
Moving and Storage Services...................... 18,492 14,918
Corporate........................................ 4,303 10,671
------- -------
Consolidated Totals.............................. $48,348 $55,377
======= =======
</Table>
Revenue and long-lived asset information by geographic area as of and for
the years ended December 31, 2001 and 2000 and December 25, 1999:
<Table>
<Caption>
2001 2000 1999
----------------------- ----------------------- ----------
LONG-LIVED LONG-LIVED
REVENUE ASSETS REVENUE ASSETS REVENUE
---------- ---------- ---------- ---------- ----------
United States................. $1,799,200 $305,944 $1,941,399 $279,328 $1,029,969
Foreign....................... 450,103 272,652 437,295 289,580 129,818
---------- -------- ---------- -------- ----------
Total......................... $2,249,303 $578,596 $2,378,694 $568,908 $1,159,787
========== ======== ========== ======== ==========
</Table>
Foreign revenue is based on the country in which the sales originated,
principally in the United Kingdom and Australia.
F-48
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(18) OPERATING SEGMENTS (CONTINUED)
Long-lived assets are comprised of property and equipment, net and goodwill
and intangible assets, net.
(19) RESTRUCTURING AND OTHER UNUSUAL CHARGE
The following tables provide details of the restructuring accrual as of
December 31, 2001:
<Table>
<Caption>
RESTRUCTURING RESTRUCTURING
ACCRUALS AS ACCRUALS AS
OF ADDITIONAL OF
DECEMBER 31, RESTRUCTURING OTHER ASSET DECEMBER 31,
2000 CHARGE ADJUSTMENTS IMPAIRMENT PAYMENTS 2001
------------- ------------- ----------- ---------- -------- -------------
FAST FORWARD PROGRAM
Severance cost................... $ 418 $ -- $292 $ -- $ (710) $ --
Outplacement services and
other.......................... 257 -- (247) -- (10) --
------ ------ ---- ----- ------- ------
Total restructuring cost......... 675 -- 45 -- (720) --
------ ------ ---- ----- ------- ------
ALLIED ACQUISITION
Severance cost................... 335 -- (170) -- (165) --
Other............................ 65 -- 112 -- (177) --
------ ------ ---- ----- ------- ------
Total restructuring cost......... 400 -- (58) -- (342) --
------ ------ ---- ----- ------- ------
MOVING AND STORAGE SERVICES--
UK OPERATING SEGMENT
Severance cost................... 135 595 -- -- (730) --
------ ------ ---- ----- ------- ------
Total restructuring cost......... 135 595 -- -- (730) --
------ ------ ---- ----- ------- ------
BUSINESS NEEDS STAFFING
ADJUSTMENT
Severance cost................... 751 429 15 -- (1,195) --
------ ------ ---- ----- ------- ------
Total restructuring cost......... 751 429 15 -- (1,195) --
------ ------ ---- ----- ------- ------
LOGISTICS PARTS CENTERS
Severances cost.................. -- 969 (325) -- (604) 40
Building leases.................. -- 2,167 353 -- (403) 2,117
Asset impairment................. -- 772 (79) (576) (37) 80
------ ------ ---- ----- ------- ------
Total restructuring cost......... -- 3,908 (51) (576) (1,044) 2,237
------ ------ ---- ----- ------- ------
Total restructuring accrual...... $1,961 $4,932 $(49) $(576) $(4,031) $2,237
====== ====== ==== ===== ======= ======
</Table>
F-49
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(19) RESTRUCTURING AND OTHER UNUSUAL CHARGE (CONTINUED)
The following table provides details of restructuring for the year ended
December 31, 2000:
<Table>
<Caption>
RESTRUCTURING RESTRUCTURING
ACCRUALS AS ACCRUALS AS
OF ALLIED OF
DECEMBER 25, ACQUISITION RESTRUCTURING OTHER DECEMBER 31,
1999 ADJUSTMENT CHARGE ADJUSTMENTS PAYMENTS 2000
------------- ----------- ------------- ----------- -------- -------------
FAST FORWARD PROGRAM
Severance cost................... $2,365 -- $1,235 $(265) $(2,917) $ 418
Outplacement services and
other.......................... 422 -- -- 105 (270) 257
------ ------- ------ ----- ------- ------
Total restructuring cost......... 2,787 -- 1,235 (160) (3,187) 675
------ ------- ------ ----- ------- ------
ALLIED ACQUISITION
Severance cost................... 2,916 (1,255) -- -- (1,326) 335
Other............................ 860 (300) -- -- (495) 65
------ ------- ------ ----- ------- ------
Total restructuring cost......... 3,776 (1,555) -- -- (1,821) 400
------ ------- ------ ----- ------- ------
MOVING AND STORAGE SERVICES--
U.K. OPERATING SEGMENT
Severance cost................... -- -- 2,700 -- (2,565) 135
------ ------- ------ ----- ------- ------
Total restructuring cost......... -- -- 2,700 -- (2,565) 135
------ ------- ------ ----- ------- ------
BUSINESS NEEDS STAFFING
ADJUSTMENT
Severance cost................... -- -- 1,084 -- (333) 751
------ ------- ------ ----- ------- ------
Total restructuring cost......... -- -- 1,084 -- (333) 751
------ ------- ------ ----- ------- ------
Total restructuring accrual...... $6,563 $(1,555) $5,019 $(160) $(7,906) $1,961
====== ======= ====== ===== ======= ======
</Table>
The following table provides details of restructuring for the year ended
December 25, 1999:
<Table>
<Caption>
RESTRUCTURING ACQUISITION RESTRUCTURING
ACCRUALS AS OF PURCHASE ACCRUALS AS OF
DECEMBER 26, RESTRUCTURING PRICE DECEMBER 25,
1998 CHARGE ALLOCATION PAYMENTS 1999
-------------- ------------- ----------- -------- --------------
FAST FORWARD PROGRAM
Severance cost........................ $ -- $3,453 $ -- $(1,088) $2,365
Outplacement services................. -- 318 -- (67) 251
Other................................. -- 328 -- (157) 171
--------- ------ ------ ------- ------
Total restructuring cost.............. -- 4,099 -- (1,312) 2,787
--------- ------ ------ ------- ------
ALLIED ACQUISITION
Severance cost........................ -- -- $2,916 -- 2,916
Other................................. -- -- 860 -- 860
--------- ------ ------ ------- ------
Total restructuring cost.............. -- -- 3,776 -- 3,776
--------- ------ ------ ------- ------
Total restructuring accrual........... $ -- $4,099 $3,776 $(1,312) $6,563
========= ====== ====== ======= ======
</Table>
F-50
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(19) RESTRUCTURING AND OTHER UNUSUAL CHARGE (CONTINUED)
(A) FAST FORWARD PROGRAM
In January 1999, with the help of outside consultants, the Company initiated
the Fast Forward Program, which was a detailed evaluation of its existing cost
structure. The program was comprised of a number of initiatives, primarily
relating to employee redundancy. The charges included estimated severance costs
for 237 employees across all operating divisions of the Company, outplacement
services and other costs. None of these charges related to the Allied
Acquisition. A total of 188 employees were terminated. During 2000, the Fast
Forward Program was completed, with remaining severance costs paid in 2001.
(B) ALLIED ACQUISITION
Included in the acquisition purchase price allocation were restructuring
charges related to the Allied Acquisition, which reflected certain severance and
relocation costs the Company incurred to effect a worldwide integration plan for
Allied's operations. A total of 66 employees were terminated and 55 were
relocated. In 2000, based on an evaluation of the remaining amount needed, a
reduction of $1,555 was made to the restructuring accrual, which was offset by
an adjustment to goodwill. During 2000, the program was completed with remaining
severance costs paid in 2001.
(C) MOVING AND STORAGE SERVICES-UK OPERATING SEGMENT
In 2000, the Company's Moving and Storage Services operating segment
initiated programs in its United Kingdom operations in an effort to restructure
the branch system and to eliminate management redundancy within its Pickfords
Vanguard unit, reducing headcount by 93 employees. Charges were recorded as
branch locations were identified for closure. The identification process
continued through 2001 and headcount was reduced by an additional 16 employees.
The programs were completed in 2001.
(D) BUSINESS NEEDS STAFFING ADJUSTMENT
In November 2000, due to business needs as determined by management, the
Company established a restructuring reserve of $1,084 whereby headcount was
reduced by 50 employees. The charges included estimated severance costs across
all operating divisions of the Company. Severance costs were paid out and the
program was completed in 2001.
(E) LOGISTICS PARTS CENTERS
In June 2001, the Company's Logistics Services operating segment established
a program to exit the Parts Center business. The charges included severance and
employee benefit costs for 293 employees, lease and asset impairment costs to
shut down and exit the Parts Center business by the end of 2001. Due to the
lease terms and severance agreements, certain payments will continue through
September 2005.
OTHER UNUSUAL CHARGE
In 1999, the Company incurred expense of $5,000 related to a customer
contract termination. The settlement agreement provided for reimbursement of
costs for cargo claims, delay claims and other costs
F-51
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(19) RESTRUCTURING AND OTHER UNUSUAL CHARGE (CONTINUED)
associated with customer service matters. The settlement allowed for the Company
to offset customer receivables against the claim payment otherwise due.
(20) RELATED PARTY
The Company, Allied Worldwide and CD&R are parties to a consulting agreement
to which CD&R is paid a management fee for financial advisory and management
consulting services. For the years ended December 31, 2001 and 2000 and
December 25, 1999, such fees were $1,375, $400 and $400, respectively.
The Company has guaranteed loans in an aggregate principal amount of $21 and
$236 as of December 31, 2001 and 2000, respectively, to various members of
management in connection with their investment in Allied Worldwide. These loans
mature on various dates in 2004 and bear interest at the prime rate plus 1.0%.
(21) MERGER WITH MOVELINE
On December 31, 2001, the Company and Moveline, Inc. ("Moveline") completed
a merger under an agreement and plan of merger ("Merger Agreement") dated as of
November 9, 2001, through a stock-for-stock merger of Moveline and a wholly
owned subsidiary of the Company ("Merger") with such subsidiary as the surviving
corporation. Under the terms of the Merger Agreement, Moveline's stockholders
received 186,879 shares of common stock of the Company's parent, Allied
Worldwide, for Moveline shares acquired in the Merger. Immediately following the
Merger, the Company contributed the surviving subsidiary to Allied Van
Lines, Inc. ("AVL"), another wholly owned subsidiary of the Company. AVL and
that subsidiary were merged, with AVL as the surviving entity.
Moveline, which was founded and spun-off by Allied Worldwide on August 1,
2000, has developed and markets a proprietary information technology-based
customer care solution that builds upon the relocation industry's historical
van-line business model. Prior to the Merger, Fund V was the primary stockholder
of both Moveline and Allied Worldwide.
In accordance with the accounting rules for mergers of entities under common
control, the Company's merger with Moveline has been accounted for in a manner
similar to a pooling-of-interests since it was acquired from Fund V, the
controlling shareholder of Moveline and the Company's parent, Allied Worldwide.
The Company's consolidated financial statements have been restated to include
the combined results of operations, financial position, and cash flows of
Moveline since inception as though it has always been a part of the Company.
As a result of the Merger, all intercompany accounts and transactions that
occurred between the Company and Moveline have been eliminated in consolidation.
There were no material adjustments to conform the accounting policies of the
combined companies.
F-52
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(21) MERGER WITH MOVELINE (CONTINUED)
Operating revenues and net loss previously reported by the separate
companies and the combined amounts presented in the accompanying Consolidated
Statements of Operations are as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Operating Revenues:
North American Van Lines, Inc............. $2,228,815 $2,371,895
Moveline, Inc............................. 26,622 9,000
Eliminations.............................. (6,134) (2,201)
---------- ----------
Combined.................................... $2,249,303 $2,378,694
========== ==========
Net Loss:
North American Van Lines, Inc............. $ (2,763) $ (10,272)
Moveline, Inc............................. (8,184) (6,807)
---------- ----------
Combined.................................... $ (10,947) $ (17,079)
========== ==========
</Table>
Costs of integration related to the Merger of $619 were expensed in the
fourth quarter 2001.
(22) SUBSEQUENT EVENTS (UNAUDITED)
On March 7, 2002, Allied Worldwide filed a certificate of amendment to its
articles of incorporation with the State of Delaware effecting a change of its
name from Allied Worldwide, Inc. to SIRVA, Inc.
On March 13, 2002, the Company announced its intention to purchase the
National Association of Independent Truckers ("NAIT"), a leading provider of
insurance services to independent contract truck drivers, for approximately
$30,000 in cash, subject to certain adjustments. NAIT is an association of more
than 11,000 independent contract truck drivers that provides its members with
occupational accident, physical damage and non-trucking liability insurance, as
well as access to a suite of professional services. The transaction is expected
to close approximately April 1, 2002. The purchase price is expected to be
funded by cash on hand and an approximately $20,000 equity contribution from
Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted
limited partnership managed by Clayton, Dubilier & Rice, Inc. ("CD&R Fund VI"),
and an affiliate of the controlling shareholder of Allied Worldwide, Clayton,
Dubilier & Rice Fund V Limited Partnership.
On March 19, 2002, Allied Worldwide entered into a definitive agreement to
purchase a business that provides comprehensive relocation services to companies
and their employees, including home sale services, relocation logistics
services, and mortgage lending services. It is expected that a wholly-owned
subsidiary of the Company will purchase all of such business' assets other than
assets relating to certain mortgage lending operations of the seller. The
Company expects that the purchase of certain assets of the mortgage lending
operations of the seller will be structured so that such operations will be
owned by a direct wholly-owned subsidiary of Allied Worldwide. Subject to
certain adjustments, the purchase price for the acquisition is approximately
$60,000, of which approximately $45,000 is payable in cash and $15,000 is
payable in notes to be issued by the Company acquisition subsidiary. In
addition, certain liabilities relating to the acquired business will be assumed
in connection with the acquisition, including indebtedness under a
F-53
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(22) SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
revolving credit facility used to fund the mortgage lending operations, under
which as of February 28, 2002 approximately $27,100 was outstanding, and which
the Company expects will be assumed by the Allied Worldwide acquisition
subsidiary. The Company expects that the cash purchase price for the
acquisition, as well as other indebtedness of the acquired business to be
assumed as part of the acquisition, which as of February 28, 2002 was
approximately $23,800, will be financed with the proceeds of an equity
contribution by CD&R Fund VI, the assumption and/or refinancing of such
indebtedness and the incurrence of additional senior indebtedness.
On March 29, 2002, the Company, per terms of the Credit Agreement, is
required to make a $21,900 prepayment of Tranche A and Tranche B debt due to
excess cash flow in 2001. A total of $4,188 will replace principle payments due
at that time with the remaining $17,712 to reduce future principle payments.
(23) SUPPLEMENTAL INFORMATION
The following summarized consolidating balance sheets, statements of
operations and statements of cash flows were prepared to segregate such
financial statements between those entities that have guaranteed the Company's
senior subordinated notes issued in connection with the Allied Acquisition
("Guarantor" entities) and those entities that did not guarantee such debt
("Non-Guarantor" entities). See Note 2 for additional information on the Allied
Acquisition.
F-54
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(23) SUPPLEMENTAL INFORMATION (CONTINUED)
Consolidated condensed balance sheet data as of December 31, 2001 and 2000
is summarized as follows:
<Table>
<Caption>
DECEMBER 31, 2001
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Current assets:
Accounts and notes receivable, net... $118,345 $ 92,560 $ 63,795 $ (7,588) $ 267,112
Other current assets................. 43,935 21,701 44,619 (294) 109,961
-------- -------- -------- --------- ----------
Total current assets................... 162,280 114,261 108,414 (7,882) 377,073
-------- -------- -------- --------- ----------
Property and equipment, net............ 72,523 11,687 81,157 -- - 165,367
Goodwill and intangible assets, net.... 409,993 3,236 -- - -- - 413,229
Other assets........................... 279,378 151,257 374,030 (664,520) 140,145
-------- -------- -------- --------- ----------
Total assets........................... $924,174 $280,441 $563,601 $(672,402) $1,095,814
======== ======== ======== ========= ==========
Current liabilities.................... $152,406 $138,820 $122,525 $ (8,454) $ 405,297
Long-term debt and capital lease
obligations.......................... 448,225 226 8,325 -- - 456,776
Other liabilities...................... 82,809 25,199 -- - 3,943 111,951
-------- -------- -------- --------- ----------
Total liabilities...................... 683,440 164,245 130,850 (4,511) 974,024
Stockholder's equity................... 240,734 116,196 432,751 (667,891) 121,790
-------- -------- -------- --------- ----------
Total liabilities and stockholder's
equity............................... $924,174 $280,441 $563,601 $(672,402) $1,095,814
======== ======== ======== ========= ==========
</Table>
<Table>
<Caption>
DECEMBER 31, 2000
------------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------ ------------
Current assets:
Accounts and notes receivable,
net.............................. $ 168,318 $142,005 $ 69,528 $ (1,886) $ 377,965
Other current assets............... 58,164 20,069 35,607 11,169 125,009
---------- -------- -------- --------- ----------
Total current assets................. 226,482 162,074 105,135 9,283 502,974
---------- -------- -------- --------- ----------
Property and equipment, net.......... 64,864 12,089 81,698 -- 158,651
Goodwill and intangible assets,
net................................ 410,257 -- -- -- 410,257
Other assets......................... 412,447 161,313 298,169 (727,209) 144,720
---------- -------- -------- --------- ----------
Total assets......................... $1,114,050 $335,476 $485,002 $(717,926) $1,216,602
========== ======== ======== ========= ==========
Current liabilities.................. $ 210,522 $155,156 $108,299 $ 15,314 $ 489,291
Long-term debt and capital lease
obligations........................ 462,994 525 -- -- 463,519
Other liabilities and minority
interest........................... 123,412 -- -- (4,704) 118,708
---------- -------- -------- --------- ----------
Total liabilities.................... 796,928 155,681 108,299 10,610 1,071,518
Stockholder's equity................. 317,122 179,795 376,703 (728,536) 145,084
---------- -------- -------- --------- ----------
Total liabilities and stockholder's
equity............................. $1,114,050 $335,476 $485,002 $(717,926) $1,216,602
========== ======== ======== ========= ==========
</Table>
F-55
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(23) SUPPLEMENTAL INFORMATION (CONTINUED)
Consolidated condensed statements of operations data for the years ended
December 31, 2001 and 2000 and December 25, 1999 are summarized as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Operating revenues..................... $824,687 $867,856 $619,686 $(62,926) $2,249,303
Total operating expenses............... 838,363 850,299 570,573 (63,234) 2,196,001
Income (loss) from operations.......... (13,676) 17,557 49,113 308 53,302
Non-operating income (expense) and
minority interest.................... 3,147 (43) (3,155) -- (51)
-------- -------- -------- -------- ----------
Income (loss) before interest, income
taxes and accounting change.......... (10,529) 17,514 45,958 308 53,251
Interest expense (income).............. (16,798) (6,111) (11,183) 96,093 62,001
-------- -------- -------- -------- ----------
Income (loss) before income taxes and
accounting change.................... 6,269 23,625 57,141 (95,785) (8,750)
Provision (benefit) for income taxes... (19,641) 5,721 15,789 -- 1,869
-------- -------- -------- -------- ----------
Income (loss) before accounting
change............................... 25,910 17,904 41,352 (95,785) (10,619)
-------- -------- -------- -------- ----------
Cumulative effect of accounting change,
net of tax........................... -- -- (328) -- (328)
-------- -------- -------- -------- ----------
Net income (loss)...................... $ 25,910 $ 17,904 $ 41,024 $(95,785) $ (10,947)
======== ======== ======== ======== ==========
</Table>
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2000
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Operating revenues..................... $919,362 $934,549 $567,959 $(43,176) $2,378,694
Total operating expenses............... 932,364 914,544 526,271 (44,330) 2,328,849
-------- -------- -------- -------- ----------
Income (loss) from operations.......... (13,002) 20,005 41,688 1,154 49,845
Non-operating income (expense) and
minority interest.................... 3,257 (200) (2,739) -- 318
-------- -------- -------- -------- ----------
Income (loss) before interest and
income taxes......................... (9,745) 19,805 38,949 1,154 50,163
Interest expense (income).............. 66,022 1,199 (748) 778 67,251
-------- -------- -------- -------- ----------
Income (loss) before income taxes...... (75,767) 18,606 39,697 376 (17,088)
Provision (benefit) for income taxes... (23,268) 5,484 17,775 -- (9)
-------- -------- -------- -------- ----------
Net income (loss)...................... $(52,499) $ 13,122 $ 21,922 $ 376 $ (17,079)
======== ======== ======== ======== ==========
</Table>
F-56
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(23) SUPPLEMENTAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 25, 1999
----------------------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
Operating revenues..................... $872,932 $131,972 $172,157 $(17,274) $1,159,787
Total operating expenses............... 879,589 132,581 166,008 (17,274) 1,160,904
-------- -------- -------- -------- ----------
Income (loss) from operations.......... (6,657) (609) 6,149 -- (1,117)
Non-operating income (expense) and
minority interest.................... 76 (379) (165) -- (468)
-------- -------- -------- -------- ----------
Income (loss) before interest, income
taxes and extraordinary loss......... (6,581) (988) 5,984 -- (1,585)
Interest expense (income).............. 25,750 (5,091) (290) 1,040 21,409
-------- -------- -------- -------- ----------
Income (loss) before income taxes and
extraordinary loss................... (32,331) 4,103 6,274 (1,040) (22,994)
Provision (benefit) for income taxes... (12,779) 2,048 4,284 -- (6,447)
-------- -------- -------- -------- ----------
Income (loss) before extraordinary
loss................................. (19,552) 2,055 1,990 (1,040) (16,547)
Extraordinary loss on debt extinguish-
ment, net of income tax benefit...... (3,387) -- -- -- (3,387)
-------- -------- -------- -------- ----------
Net income (loss)...................... $(22,939) $ 2,055 $ 1,990 $ (1,040) $ (19,934)
======== ======== ======== ======== ==========
</Table>
F-57
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(23) SUPPLEMENTAL INFORMATION (CONTINUED)
Consolidated condensed statements of cash flows data for the years ended
December 31, 2001 and 2000 and December 25, 1999 are summarized as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001
-------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS CONSOLIDATED
-------- ---------- ---------- ------------
Net cash provided by (used in) operating
activities........................................ $ 82,473 $ (673) $ 29,523 $111,323
-------- ------- -------- --------
Cash flows from investing activities:
Additions of property and equipment............. (24,431) (2,970) (20,947) (48,348)
Proceeds from sale of property and equipment.... 1,810 553 1,114 3,477
Purchases of investments........................ -- -- (87,305) (87,305)
Proceeds from maturity or sale of investments... -- -- 81,905 81,905
Payment of agent contract costs................. (1,371) -- -- (1,371)
Acquisitions (net of cash acquired)............. -- (4,000) -- (4,000)
Settlement of acquisition purchase price
dispute....................................... (17,357) -- -- (17,357)
-------- ------- -------- --------
Net cash used in investing activities............. (41,349) (6,417) (25,233) (72,999)
-------- ------- -------- --------
Cash flows from financing activities:
Borrowings from revolving credit facility,
net........................................... (36,508) -- (1,435) (37,943)
Change in balance of outstanding checks......... (2,815) 8,081 (9,348) (4,082)
Borrowings on long-term debt.................... 672 -- -- 672
Sale of equipment notes receivable.............. -- 6,317 -- 6,317
Principal payments on long-term debt............ (11,833) -- -- (11,833)
Principal payments under capital lease
obligations................................... (2,159) (81) (242) (2,482)
Other financing activities...................... -- (243) -- (243)
-------- ------- -------- --------
Net cash provided by (used for) financing
activities........................................ (52,643) 14,074 (11,025) (49,594)
-------- ------- -------- --------
Effect of translation adjustment on cash.......... -- -- (120) (120)
-------- ------- -------- --------
Net increase (decrease) in cash and cash
equivalents....................................... (11,519) 6,984 (6,855) (11,390)
Cash and cash equivalents at beginning of
period............................................ 17,516 (2,969) 28,962 43,509
-------- ------- -------- --------
Cash and cash equivalents at end of period........ $ 5,997 $ 4,015 $ 22,107 $ 32,119
======== ======= ======== ========
</Table>
F-58
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(23) SUPPLEMENTAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2000
-------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS CONSOLIDATED
-------- ---------- ---------- ------------
Net cash provided by (used in) operating
activities........................................ $ 27,157 $(5,676) $ 31,332 $ 52,813
-------- ------- -------- --------
Cash flows from investing activities:
Additions of property and equipment............. (30,014) (3,952) (21,411) (55,377)
Proceeds from sale of property and equipment.... 15,086 -- 506 15,592
Purchases of investments........................ (800) -- (55,141) (55,941)
Proceeds from maturity or sale of investments... -- -- 49,353 49,353
Payment of agent contract costs................. (1,120) (1,113) -- (2,233)
Acquisitions (net of cash acquired)............. (4,200) -- (1,580) (5,780)
-------- ------- -------- --------
Net cash used in investing activities............. (21,048) (5,065) (28,273) (54,386)
-------- ------- -------- --------
Cash flows from financing activities:
Borrowings from revolving credit facility,
net........................................... 18,330 -- 184 18,514
Change in balance of outstanding checks......... 9,980 209 (23) 10,166
Sale of equipment notes receivable.............. -- 11,121 -- 11,121
Principal payments on long-term debt............ (6,811) -- -- (6,811)
Principal payments under capital lease
obligations................................... (4,315) (91) -- (4,406)
Payment for transfer of insurance liabilities... (6,672) -- -- (6,672)
Other financing activities...................... -- (99) -- (99)
-------- ------- -------- --------
Net cash provided by financing activities......... 10,512 11,140 161 21,813
-------- ------- -------- --------
Effect of translation adjustment on cash.......... -- -- (1,886) (1,886)
-------- ------- -------- --------
Net increase in cash and cash equivalents......... 16,621 399 1,334 18,354
Cash and cash equivalents at beginning of
period............................................ 894 (3,368) 27,629 25,155
-------- ------- -------- --------
Cash and cash equivalents at end of period........ $ 17,515 $(2,969) $ 28,963 $ 43,509
======== ======= ======== ========
</Table>
F-59
<Page>
NORTH AMERICAN VAN LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AT DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(23) SUPPLEMENTAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 25, 1999
--------------------------------------------------
(2)
(1) TOTAL NON- NAVL
PARENT GUARANTORS GUARANTORS CONSOLIDATED
--------- ---------- ---------- ------------
Net cash provided by (used in) operating
activities....................................... $ (10,799) $(3,842) $26,228 $ 11,587
--------- ------- ------- ---------
Cash flows from investing activities:
Additions of property and equipment............ (8,689) -- (4,038) (12,727)
Proceeds from sale of property and equipment... 3,437 -- 14 3,451
Purchases of investments....................... -- -- (4,047) (4,047)
Proceeds from maturity or sale of
investments.................................. -- -- 2,583 2,583
Payment of agent contract costs................ (1,825) -- -- (1,825)
Acquisitions (net of cash acquired)............ (396,371) -- -- (396,371)
--------- ------- ------- ---------
Net cash used in investing activities............ (403,448) -- (5,488) (408,936)
--------- ------- ------- ---------
Cash flows from financing activities:
Debt issuance costs............................ (19,208) -- -- (19,208)
Borrowings from revolving credit facility,
net.......................................... 41,929 -- -- 41,929
Change in balance of outstanding checks........ 2,548 53 (23) 2,578
Borrowings on long-term debt................... 475,000 -- -- 475,000
Principal payments on long-term debt........... (143,018) -- -- (143,018)
Principal payments under capital lease
obligations.................................. (87) -- -- (87)
Payment for transfer of insurance
liabilities.................................. (10,865) -- -- (10,865)
Proceeds from capital contribution from
parent....................................... 73,950 -- -- 73,950
Other financing activities..................... -- 326 -- 326
--------- ------- ------- ---------
Net cash provided by (used in) financing
activities....................................... 420,249 379 (23) 420,605
--------- ------- ------- ---------
Effect of translation adjustments on cash........ (175) -- -- (175)
--------- ------- ------- ---------
Net increase (decrease) in cash and cash
equivalents...................................... 5,827 (3,463) 20,717 23,081
Cash and cash equivalents at beginning of
period........................................... 311 95 1,668 2,074
--------- ------- ------- ---------
Cash and cash equivalents at end of period....... $ 6,138 $(3,368) $22,385 $ 25,155
========= ======= ======= =========
</Table>
- ------------------------
(1) Parent includes the accounts of North American Van Lines, Inc., a Delaware
corporation and the issuer of the debt.
(2) Total Guarantors include the accounts of the following subsidiaries of North
American Van Lines, Inc. or its subsidiary, Allied Van Lines, Inc.; Fleet
Insurance Management, Inc., an Indiana corporation; FrontRunner
Worldwide, Inc., a Delaware corporation; NACAL, Inc., a California
corporation; NAVTRANS International Freight Forwarding, Inc., an Indiana
corporation; Federal Traffic Services, Inc., an Indiana corporation; North
American Logistics. Ltd., an Indiana corporation; North American Van Lines
of Texas, Inc., a Texas corporation; Relocation Management Systems, Inc., a
Delaware corporation; Great Falls North American, Inc., a Montana
corporation; Allied Van Lines, Inc., a Delaware corporation; Allied
International N.A., Inc. a Delaware corporation; A Relocation Solutions
Management Company, Inc., a Delaware corporation; Vanguard Insurance
Agency, Inc., an Illinois corporation; Allied Van Lines Terminal
Company, Inc., a Delaware corporation; Meridian Mobility Resources, Inc., a
Delaware corporation; and Allied Freight Forwarding, Inc., a Delaware
corporation. Each Guarantor is a wholly owned subsidiary of North American
Van Lines, Inc. or its subsidiary, Allied Van Lines, Inc. and will jointly
and severally, irrevocably and fully and unconditionally guarantee the
punctual payment of such debt used in connection with the Allied
acquisition.
F-60
<Page>
SCHEDULE II
NORTH AMERICAN VAN LINES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND DECEMBER 25, 1999
(in thousands)
<Table>
<Caption>
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------- ---------- ------------------------ ------------- ---------
ADDITIONS
------------------------
CHARGED TO
OTHER
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(A) DEDUCTIONS(B) OF PERIOD
- ------------------------------------------- ---------- ---------- ----------- ------------- ---------
2001:
Allowance for doubtful accounts.......... $26,721 $5,558 $ -- $(7,893) $24,386
Valuation allowance for contracts
receivable............................... 255 112 -- -- 367
------- ------ ------- ------- -------
$26,976 $5,670 $ -- $(7,893) $24,753
======= ====== ======= ======= =======
2000:
Allowance for doubtful accounts.......... $18,771 $7,131 $ 1,194 $ (375) $26,721
Valuation allowance for contracts
receivable............................... 255 -- -- -- 255
------- ------ ------- ------- -------
$19,026 $7,131 $ 1,194 $ (375) $26,976
======= ====== ======= ======= =======
1999:
Allowance for doubtful accounts.......... $11,656 $2,775 $ 6,391 $(2,051) $18,771
Valuation allowance for contracts
receivable............................... 25 230 -- -- 255
------- ------ ------- ------- -------
$11,681 $3,005 $ 6,391 $(2,051) $19,026
======= ====== ======= ======= =======
</Table>
- ------------------------
(a) Primarily related to acquisitions.
(b) Primarily related to write-offs of accounts receivable, net of recoveries
and currency translation.
F-61
<Page>
[LOGO]
NFC MOVING SERVICES GROUP
REPORT OF INDEPENDENT AUDITORS
To: The Board of Directors
Exel plc
We have audited the combined profit & loss account and combined statement of
total recognised gains and losses, cash flows and NFC Group Investment of NFC
Moving Services Group for the year ended September 30, 1999. These financial
statements are the responsibility of the management of NFC Moving Services
Group. Our responsibility is to form an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
and United States generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and combined cash
flows of NFC Moving Services Group for the year ended September 30, 1999 in
conformity with accounting principles generally accepted in the United Kingdom
which differ in certain respects from those generally accepted in the United
States (see Note 16 of Notes to the Combined Financial Statements).
[LOGO]
ERNST & YOUNG
London, England
March 10, 2000
F-62
<Page>
NFC MOVING SERVICES GROUP
COMBINED PROFIT AND LOSS ACCOUNT
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
TURNOVER--(Note 4).......................................... 717.5
=====
Operating profit (i)--(Note 7)
Before exceptional items.................................... 29.1
Exceptional costs of reorganization......................... (1.3)
-----
Total operating profit...................................... 27.8
Profit on disposals of properties........................... 0.4
-----
PROFIT BEFORE INTEREST...................................... 28.2
Interest (net) (ii)--(Note 8)............................... (3.4)
-----
Profit before tax and exceptional items..................... 25.7
Exceptional items........................................... (0.9)
-----
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 24.8
Taxation (ii)--(Note 9)..................................... (7.0)
-----
PROFIT FOR THE FINANCIAL YEAR (i) (ii)...................... 17.8
=====
</Table>
- ------------------------
(i) A summary of the significant adjustments to profit for the financial year
which would be required if US generally accepted accounting principles had
been applied instead of those generally accepted in the United Kingdom is
given in Note 16 of Notes to the Combined Financial Statements.
(ii) Interest (net) and taxation are not necessarily representative of the
income and charges that would have been earned or incurred by NFC Moving
Services Group on a stand-alone basis or that will be earned or incurred by
NFC Moving Services Group in the future.
F-63
<Page>
NFC MOVING SERVICES GROUP
COMBINED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
PROFIT FOR THE FINANCIAL YEAR............................... 17.8
Exchange differences........................................ 0.6
Unrealized surplus on revaluation of properties............. 0.6
----
TOTAL GAINS AND LOSSES RELATING TO THE YEAR (i)............. 19.0
====
</Table>
- ------------------------
(i) The significant differences between the combined statement of total
recognized gains and losses presented above and the combined statement of
comprehensive income required under US generally accepted accounting
principles are described in Note 16 of Notes to the Combined Financial
Statements.
COMBINED STATEMENT OF HISTORICAL COST PROFITS AND LOSSES
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 24.8
Difference between depreciation based on historical costs
and on revalued amounts................................... 0.2
----
HISTORICAL COST PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION.................................................. 25.0
====
Historical cost profit for the financial year............... 18.0
====
</Table>
F-64
<Page>
NFC MOVING SERVICES GROUP
COMBINED CASH FLOW STATEMENT (I)
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
NET CASH INFLOW FROM OPERATING ACTIVITIES................... 35.1
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received........................................... 3.1
Interest paid............................................... (0.1)
NFC Group interest (net).................................... (6.4)
-----
NET CASH (OUTFLOW)/INFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (II)................................. (3.4)
TAXATION
UK corporation tax paid..................................... (0.2)
Overseas tax paid........................................... (4.9)
NFC Group tax (net)......................................... (3.3)
-----
TAX PAID (II)............................................... (8.4)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchases of property, plant and equipment.................. (15.9)
Purchases of investments (net).............................. (4.4)
Disposals of property, plant and equipment.................. 3.4
-----
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT................................................ (16.9)
-----
FREE CASH FLOW.............................................. 6.4
ACQUISITIONS AND DISPOSALS
Purchases of subsidiary undertakings--(Note 14)............. (10.3)
=====
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING.................. (3.9)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING (II)--(NOTE 14).... 14.2
-----
INCREASE IN CASH--(NOTE 14)................................. 10.3
=====
RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOW
OPERATING PROFIT............................................ 27.8
Depreciation and amortization............................... 10.3
Profit on disposals of tangible fixed assets................ (0.4)
Movements in provisions--(Note 14).......................... 0.9
Movements in working capital--(Note 14)..................... (3.5)
-----
NET CASH INFLOW FROM OPERATING ACTIVITIES................... 35.1
=====
</Table>
- ------------------------
(i) The significant differences between the combined cash flow statements
presented above and those required under US generally accepted accounting
principles are described in Note 16 of Notes to the Combined Financial
Statements.
(ii) Net interest received/(paid), tax paid and financing cash flows are not
necessarily representative of the amounts that would have occurred in NFC
Moving Services Group on a stand-alone basis or that will occur in NFC
Moving Services Group in the future.
F-65
<Page>
NFC MOVING SERVICES GROUP
COMBINED STATEMENT OF CHANGES IN
NFC GROUP INVESTMENT
<Table>
<Caption>
SEPTEMBER 30
------------------
1999
----
(L MILLION)
Profit for the financial year............................ 17.8
NFC Group funding/(divestment (net)...................... (136.5)
Unrealized surplus on revaluation of properties.......... 0.6
Goodwill on acquisitions................................. --
Exchange differences..................................... 0.6
------
Movement in year......................................... (119.5)
Opening balance.......................................... 49.2
------
Closing balance(i)....................................... (70.3)
======
</Table>
- ------------------------
(i) At September 30, 1999, the cumulative goodwill written off, excluding that
relating to undertakings disposed of, was L69.4 million.
F-66
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PREPARATION
On November 19, 1999, NA Holding Corporation acquired all of the moving
services businesses and assets (NFC Moving Services Group) of Exel plc (formerly
NFC plc, the company having changed its name on February 23, 2000).
These combined financial statements have been prepared to show the
performance of NFC Moving Services Group for the year ended September 30, 1999
as if it had been in existence from October 1, 1996. They are based on the
audited financial information of the NFC Group as if the businesses which
comprise NFC Moving Services Group had been part of NFC Moving Services Group
for all of this period.
The funding of NFC Moving Services Group's operations included share
capital, loans from NFC plc group companies (both interest free and interest
bearing) and/or external borrowings. These combined financial statements include
interest income and expense actually earned by or charged to NFC Moving Services
Group in respect of external deposits or borrowings or deposits with or
borrowings from members of the NFC Group not included in NFC Moving Services
Group. These amounts are not necessarily representative of the amounts that
would have been earned or incurred by NFC Moving Services Group on a stand-alone
basis or that will arise in NFC Moving Services Group in the future.
The businesses within NFC Moving Services Group have been included in the
tax arrangements of the NFC Group. These combined financial statements include
tax charges and cash flows actually borne by the businesses within NFC Moving
Services Group. These charges and cash flows are not necessarily representative
of the charges or cash flows that would have arisen in NFC Moving Services Group
on a stand-alone basis or that will arise in NFC Moving Services Group in the
future.
These combined financial statements include an allocation of NFC Group's
central overhead costs based on the level of operating profit. Management
believes that this is a reasonable basis for allocation. These amounts are not
necessarily representative of the amounts that would have arisen in NFC Moving
Services Group on a stand-alone basis or that will arise in NFC Moving Services
Group in the future.
NOTE 2 -- ACCOUNTING POLICIES
(A) ACCOUNTING CONVENTION
The combined financial statements are prepared under the historical cost
convention as modified by the revaluation of certain land and buildings and are
in accordance with all applicable UK accounting standards. Operational freehold
and long leasehold land and buildings are revalued to existing use value over a
five year rolling period.
With effect from October 1, 1998, new UK Financial Reporting Standards (FRS)
will apply to the financial statments of NFC Moving Services Group.
Restructuring costs are now charged to the combined profit and loss account in
the period in which the expense was committed, as required by FRS 12,
Provisions, Contingent Liabilities and Contingent Assets, which has been applied
in these combined financial statements. From the same date, goodwill on
acquisitions is capitalized and amortized over its useful life in accordance
with FRS 10, Goodwill and Intangible Assets.
(B) FOREIGN CURRENCIES
Assets, liabilities, revenues and costs denominated in foreign currencies
are recorded at the rates of exchange ruling at the date of the transactions;
monetary assets and liabilities at balance sheet dates are
F-67
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- ACCOUNTING POLICIES (CONTINUED)
translated at year-end rates of exchange. All exchange differences thus arising
are reported as part of the result for the relevant year.
On combination, the results of businesses accounting in foreign currencies
are translated at average rates of exchange ruling during the relevant year. The
assets and liabilities of such businesses are translated at rates ruling at
balance sheet dates. Differences arising on net investment in overseas
businesses are taken to NFC Group Investment.
(C) FIXED ASSETS AND DEPRECIATION
Depreciation of property, plant and equipment (excluding freehold land,
which is not depreciated) is calculated on the straight line basis at rates
estimated to write off the whole of the revalued amount or cost of each asset
over its estimated useful life. Assets which are not expected to be held for the
whole of their useful life are written down to estimated residual values at the
expected times of disposal. The categories of property, plant and equipment are
as follows.
<Table>
Freehold buildings....................... The maximum useful life is estimated as
50 years.
Leasehold land and buildings............. Costs are written off over the terms of
the leases, or, in respect of buildings,
the estimated remaining life if shorter.
Revenue earning vehicles, plant and Estimated lives are mainly five to ten
equipment.............................. years with a few exceptions for
specialized equipment, for which the
maximum estimated life is 15 years.
</Table>
Disposals of land and buildings are taken into account when sale agreements
have been entered into prior to the balance sheet date, provided that the
disposal has been completed before the UK statutory accounts are approved.
(D) LEASED ASSETS
Assets held under leasing arrangements which transfer substantially all the
risks and rewards of ownership to the businesses are capitalized. The capital
element of the related rental obligations is included in accounts payable. The
interest element of the rental obligations is charged to the profit and loss
account so as to produce a constant periodic rate of charge on the remaining
balance of the obligation. Hire purchase arrangements, which are not separately
distinguished, are dealt with similarly. Rentals for other leased assets
acquired under the terms of operating leases are charged directly to the profit
and loss account on the straight line basis over the terms of the leases.
(E) TURNOVER
Turnover comprises the value of charges, exclusive of value added tax and
equivalent taxes, made to outside parties for services rendered.
F-68
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- ACCOUNTING POLICIES (CONTINUED)
(F) GOODWILL
Goodwill arising on acquisitions is set off against NFC Group Investment.
From October 1, 1998, goodwill is capitalized and amortized over its useful life
in accordance with FRS 10. On the disposal of a business, any goodwill relating
thereto that can be identified and has not previously been charged to profit and
loss account is included in the profit or loss on disposal.
(G) DEFERRED TAXATION
Deferred taxation is provided at expected future rates of tax on all timing
differences to the extent that it is probable that a liability or asset will
crystallize.
(H) PENSIONS
The UK businesses included in these financial statements contribute to the
NFC Retirement Plan for the funding of retirement benefits for each scheme
member during his or her working life in order to pay benefits to them after
retirement and to their dependents after their death. The regular cost of
providing these benefits is assessed by external professional actuaries and is
charged to the combined profit and loss account. Overseas businesses make
provisions for pensions in accordance with local law and practice. There are no
other post-retirement benefits.
(I) SURPLUS PROPERTIES
When leasehold properties become surplus to requirements, a provision for
holding costs through to estimated disposal dates is charged to the combined
profit and loss account.
NOTE 3 -- EXCHANGE RATES
The significant exchange rates relative to L sterling used in the
preparation of these financial statements are as follows. Average rates are
weighted according to monthly net sales.
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
-----------------------
AVERAGE YEAR END
RATE RATE
---------- ----------
Australian dollar...................................... 2.55 2.52
United States dollar................................... 1.63 1.65
==== ====
</Table>
F-69
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- TURNOVER
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
United Kingdom and Ireland.............................. 126.5
Continental Europe...................................... 21.8
Americas................................................ 516.2
Asia Pacific............................................ 53.0
-----
717.5
=====
</Table>
The analysis of turnover is by management structure. The analysis by
destination would not be materially different. Turnover between geographical
segments is not material.
NOTE 5 -- OPERATING CHARGES
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
Raw materials, consumables and other purchases.......... 11.2
Staff costs
wages and salaries.................................... 88.8
social security costs................................. 7.9
other pension costs -- (Note 11)...................... 3.8
Depreciation............................................ 10.1
Amortization............................................ 0.2
Operating lease rentals (including short-term hire)
vehicles, plant and equipment......................... 6.6
land and buildings.................................... 12.5
Redundancy.............................................. 0.2
Auditors' remuneration.................................. 0.2
Exceptional costs of reorganization..................... 1.3
Sub-contractors' and agents' charges.................... 453.9
Other operating charges................................. 93.0
-----
689.7
=====
</Table>
The remuneration of the auditors for non-audit work amounted to Lnil in
respect of UK businesses and L0.1 million in respect of overseas businesses.
F-70
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- EMPLOYEES
The average number of persons employed during the year was as follows:
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
United Kingdom and Ireland.............................. 1,759
Continental Europe...................................... 340
Americas................................................ 861
Asia Pacific............................................ 839
-----
3,799
=====
</Table>
The number of persons employed at the end of the year was as follows:
<Table>
<Caption>
SEPTEMBER 30
------------
1999
----
United Kingdom and Ireland.............................. 1,848
Continental Europe...................................... 326
Americas................................................ 849
Asia Pacific............................................ 824
-----
3,847
=====
</Table>
NOTE 7 -- OPERATING PROFIT
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
United Kingdom and Ireland.............................. 12.3
Continental Europe...................................... 1.2
Americas................................................ 12.6
Asia Pacific............................................ 3.0
----
29.1
Exceptional items
United Kingdom and Ireland............................ (0.4)
Continental Europe.................................... (0.9)
Americas.............................................. --
----
27.8
====
</Table>
F-71
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- INTEREST (NET) (I)
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
Interest on bank loans and overdrafts................... (0.1)
NFC Group interest payable.............................. (7.4)
----
(7.5)
Interest income......................................... 3.1
NFC Group interest receivable........................... 1.0
----
(3.4)
====
</Table>
- ------------------------
(i) As explained in Note 1, interest (net) is not necessarily representative of
the income and charges that would have been reported by NFC Moving Services
Group on a stand-alone basis or that will be reported by NFC Moving Services
Group in the future.
NOTE 9 -- TAXATION (I)
The analysis of the taxation charge is as follows:
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
UK corporation tax at 30.5%............................. 2.6
Double taxation relief.................................. (0.1)
Deferred corporation tax................................ 1.2
Overseas taxes -- current............................... 2.5
-- deferred.............................. 0.8
----
7.0
====
</Table>
- ------------------------
(i) As explained in Note 1, taxation is not necessarily representative of the
charges that would have been reported by NFC Moving Services Group on a
stand-alone basis or that will be reported by NFC Moving Services Group in
the future.
F-72
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--PROVISIONS FOR LIABILITIES AND CHARGES
<Table>
<Caption>
SURPLUS DEFERRED
PROPERTIES INSURANCE TAXATION OTHER TOTAL
---------- --------- -------- -------- --------
October 1, 1998.................................... 0.8 24.9 (0.3) 0.8 26.2
Exchange differences............................... -- 0.7 (0.1) -- 0.6
Charged to profit and loss account................. (0.2) 44.4 2.0 0.1 46.3
Utilized........................................... (0.3) (43.0) -- (0.1) (43.4)
---- ----- ----- ---- -----
September 30, 1999................................. 0.3 27.0 1.6 0.8 29.7
==== ===== ===== ==== =====
</Table>
The major components of the provision for deferred taxation and the amounts
not provided are as follows:
<Table>
<Caption>
PROVIDED NOT PROVIDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1999 1999
------------- -------------
(L MILLION) (L MILLION)
Accelerated tax depreciation................................ 2.2 2.6
Other (provisions, losses, etc.)............................ (0.6) (10.8)
---- -----
1.6 (8.2)
==== =====
</Table>
The above summary does not include any liability to tax on capital gains
which might arise if land and buildings were to be sold at their revalued
amounts.
NOTE 11--PENSIONS
The UK businesses covered by these combined financial statements participate
in the NFC Retirement Plan which is fully funded. It is a defined benefit plan,
except for that part of it for members under 40 which is a defined contribution
plan. The assets of the Plan are held in trust funds independent of the
participating businesses. The Plan has a surplus which is recognized and
disclosed in the financial statements of NFC plc but none of which has been
allocated to any of the businesses covered by these financial statements.
Employer and employee contributions to the Plan are determined across
participating businesses in the NFC Group in consultation with external
professional actuaries, whose latest valuation was made as at March 31, 1997.
The charge in these combined financial statements in respect of the Plan is the
regular cost of benefits accruing.
The majority of overseas plans are defined contribution plans. The Allied
Van Lines retirement program consisted of a defined benefit plan and a defined
contribution plan. These plans were terminated on December 31, 1997 and the
accrued benefits frozen. The terminated plans have been replaced by defined
contribution plans. The latest actuarial valuations of overseas defined benefit
plans show that they are adequately funded.
NOTE 12--CONTINGENT LIABILITIES
The nature of the businesses included in these financial statements and the
extent of their operations are such that they are from time to time involved in
legal proceedings, as plaintiff or defendant. No such proceedings as at
September 30, 1999, are expected to have a material effect on these businesses.
F-73
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CONTINGENT LIABILITIES (CONTINUED)
One of the UK businesses included in these financial statements, together
with businesses not so included, has given cross guarantees to and entered into
set off arrangements with bankers which guarantee and offset any monies owing or
owed from time to time, including principal, interest and other related charges,
in respect of the cash management facilities of the NFC Group. At September 30,
1999, the relevant business had a contingent liability under these arrangements
of L2.7m. Its contingent liabilities under these arrangements were terminated on
the change of ownership on November 19, 1999 (see Note 1).
Some of the companies included in these financial statements are guarantors
of agreements entered into by Exel plc (formerly NFC plc) for the provision of
borrowing facilities and they are jointly and severally liable for all borrowing
thereunder. At September 30, 1999, there were no drawings under these facilities
and the contingent liabilities were terminated on November 19, 1999.
One of the businesses included in these financial statements is a user and
another is a guarantor of letters of credit made in the ordinary course of
business; no liabilities are expected to arise under these arrangements. The
guarantor was released on November 19, 1999.
For VAT purposes, the UK businesses included in these financial statements
were, until September 30, 1998, members of the Pickfords VAT group, under which
they had joint and several liability for amounts due by other members of that
group. From that date until November 19, 1999, those businesses were members of
the NFC VAT group and they are jointly and severally liable for amounts due by
other members (including businesses not included in these financial statements)
of that VAT group. Since November 19, 1999, those businesses have been members
of the Pickfords VAT group and they are jointly and severally liable for amounts
due by other members of that VAT group.
NOTE 13--ACQUISITION
The assets and liabilities acquired with the business of Pickfords Vanguard
on November 16, 1998 were as follows (with the fair values being the book
values):
<Table>
<Caption>
FAIR
VALUES
-----------
(L MILLION)
Property, plant and equipment............................... 0.9
Net debt.................................................... (0.1)
Other current assets........................................ 5.3
Other current liabilities................................... (1.4)
----
4.7
Goodwill.................................................... 5.9
----
Consideration and costs..................................... 10.6
====
</Table>
F-74
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14--CONSOLIDATED CASH FLOW STATEMENT
<Table>
<Caption>
YEAR ENDED
SEPTEMBER 30
------------
1999
----
(L MILLION)
MOVEMENTS IN PROVISIONS
Insurance................................................... 1.4
Surplus property............................................ (0.5)
----
0.9
====
MOVEMENTS IN WORKING CAPITAL
Inventories................................................. (0.1)
Receivables................................................. (7.5)
Payables.................................................... 4.1
----
(3.5)
====
ACQUISITIONS
Consideration and costs..................................... 10.6
Deferred consideration...................................... (0.3)
----
Cash paid................................................... 10.3
====
FINANCING
NFC Group funding (net)..................................... 14.2
====
</Table>
CASH
<Table>
<Caption>
BANK
CASH OVERDRAFTS TOTAL
-------- ---------- --------
(L MILLION)
October 1, 1998....................................... 18 (2.2) 15.8
Exchange differences.................................. 0.5 (0.1) 0.4
Movements............................................. 12.1 (1.8) 10.3
---- ---- ----
September 30, 1999.................................... 30.6 (4.1) 26.5
==== ==== ====
</Table>
F-75
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14--CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
RECONCILIATION OF CASH
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
Net cash inflow before financing........................ (3.9)
Exchange differences.................................... 0.4
Net NFC Group funding................................... 14.2
----
Movement in net cash.................................... 10.7
Net cash at beginning of year........................... 15.8
----
Net cash at end of year................................. 26.5
====
</Table>
ANALYSIS OF NET CASH
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
Cash at bank and in hand................................ 30.6
Overdrafts.............................................. (4.1)
----
26.5
====
</Table>
NOTE 15--RELATED PARTY TRANSACTIONS
NFC Moving Services Group does not operate as a separate group and
consequently there were a number of transactions between its businesses and
companies and other businesses and companies within the NFC Group in the year
ended September 30, 1999. These included transactions relating to insurance
management and underwriting, pension administration, treasury, property and
taxation management and other central services supplied by Exel plc (formerly
NFC plc). The transactions have not been identified individually as it is not
practical to do so. Transitional arrangements have been agreed for the provision
on normal commercial terms of pensions administration and certain other central
services for periods after the acquisition.
NOTE 16-- DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The accounting policies under which these combined financial statements have
been prepared conform with accounting principles generally accepted in the
United Kingdom ("UK GAAP"). Such principles differ from those generally accepted
in the United States ("US GAAP") in the following significant respects.
TAXATION: Deferred taxation is provided at expected future rates of tax
using the liability method on all material timing differences where, in the
opinion of the Directors, liabilities or assets will crystallize in the
forseeable future. Under US GAAP, deferred tax is recognized on all temporary
differences between the tax and book bases of assets and liabilities including
the differences between the assigned fair values and tax bases of assets and
liabilities acquired, subject to a valuation allowance if it is more likely than
not that some or all of a deferred tax asset will not be realised. The taxation
charges included in these combined financial statements are not representative
of those that would have arisen in NFC Moving Services Group
F-76
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16-- DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
on a stand-alone basis or would arise in NFC Moving Services Group in the
future. The reconciliations below include adjustments required to show taxation
charges on a stand-alone basis.
DISPOSAL OF PROPERTY: Profits and losses on the disposal of property are
taken into account where sale agreements have been entered into prior to the
accounting date and completion of such agreements has taken place before the
date of approval of the UK statutory accounts. Under US GAAP such profits and
losses would only be accounted for if completion had taken place on or before
the accounting date.
REVALUATIONS OF LAND AND BUILDINGS: Certain properties were revalued at
September 30, 1995, April 30, 1996, April 30, 1997, April 30, 1998 and
April 30, 1999 and those revaluations have been incorporated in the financial
statements. Accordingly, in subsequent years the amortization and depreciation
charges are based on the relevant valuations. Under US GAAP property is shown at
cost and amortization and depreciation charges are related thereto.
STAFF COSTS: The Group's policy in respect of holiday pay is to charge it as
it is paid. US GAAP require that account must be taken of all such payments due
but not paid.
PENSION COSTS: Provision is made for the cost of retirement benefits payable
by the NFC Retirement Plan as assessed by external professional actuaries and is
charged to the profit and loss account so as to spread the cost over the period
during which the employer derives benefit from the employee's services. Under US
GAAP, the NFC Retirement Plan would be treated as a multiemployer plan. As such,
the contributions made to the Plan would be recognized as the pension cost in
the year. These financial statements include the regular cost of pensions which
are paid to a company in the NFC Group. As these contributions are not paid by
that company to the Plan, they would, under US GAAP, be treated as distributions
to the NFC Group and would be included in NFC Group Investment.
INVESTMENTS: Under UK GAAP, investments are stated at cost less any
provision for permanent diminution in value. Under US GAAP investments available
for sale are included at market value. Under US GAAP, unrealized gains on
investments are included in comprehensive income.
GOODWILL: Goodwill arising on acquisitions is written off to NFC Group
Investment on acquisition and, on the subsequent sale of a business, is taken
into account in the determination of the gain or loss on sale. Under US GAAP,
goodwill is amortized over its estimated useful life not exceeding 40 years. For
the purposes of the summary below goodwill has been amortized over its estimated
useful life which is estimated to range from 10 to 40 years. From October 1,
1998, goodwill is capitalized and amortized over its useful life in accordance
with FRS 10. On the sale of a business, any unamortized goodwill relating
thereto would be taken into account in the determination of the gain or loss on
the sale. For the purposes of US GAAP, the businesses periodically evaluate the
recoverability of goodwill based on estimates of future profitability. If an
impairment is determined, the amount of such impairment is calculated based on
estimated recoverability.
EXCEPTIONAL ITEMS: Under US GAAP, the presentation of operating profit
before exceptional items and profit before tax and exceptional items is not
permitted. The amounts reported as exceptional items, which include the profit
or loss on disposals of properties and the loss on disposal of operations
reported after operating profit under UK GAAP, would be included in the
determination of operating profit under US GAAP.
F-77
<Page>
NFC MOVING SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16-- DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
The effect of the significant adjustments to profit for the financial year,
comprehensive income and NFC Group Investment which would be required if US GAAP
had been applied instead of UK GAAP is summarized below.
PROFIT FOR THE FINANCIAL YEAR
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30
-----------------------
1999
----
(L MILLION)
Profit for the financial year as reported..................... 17.8
US GAAP adjustments:
Operating charges
Staff costs -wages and salaries............ 0.8
-pensions...................... 1.7
Depreciation and -goodwill...................... (0.9)
amortization
-revaluation of land and
buildings.................... 0.2
Taxation -- stand-alone adjustment............................ (0.9)
Deferred taxation -methodology................... 0.8
-on adjustments above.......... (1.7)
----
--
----
Profit for the financial year as adjusted to accord with US
GAAP.......................................................... 17.8
====
COMPREHENSIVE INCOME
Total recognized gains and losses as reported................. 19.0
US GAAP adjustments:
Adjustments to profit for the financial year as above......... --
Unrealized surplus on revaluation of properties............... (0.6)
Unrealized holding losses on investments...................... (1.0)
Deferred taxation on unrealized holding gains/(losses) on
investments................................................... 0.4
----
Comprehensive income in accordance with US GAAP............... 17.8
====
</Table>
F-78
<Page>
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
NORTH AMERICAN VAN LINES, INC.
OFFER TO EXCHANGE ITS
13 3/8% SENIOR SUBORDINATED NOTES DUE 2009
JUNE 25, 2002
- --------------------------------------------------------------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
Until September 23, 2002, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------